Hologic Revenue Declines as COVID-19 Recedes, but Growth in Base Business Softens the Blow

Hologic delivered solid fiscal first-quarter results that generally were consistent with our expectations on the top and bottom lines, and after a few small adjustments to our near-term assumptions, we’re leaving our fair value estimate intact. Demand for COVID-19 tests and supplies continues to dominate the immediate prospects for Hologic, and with the trough between the delta and omicron variants falling in the fiscal first quarter, declines in pandemic testing drove total quarterly revenue decline to 9%. In particular, quarterly worldwide molecular diagnostics revenue fell 18% in constant currency year over year. We expect further declines in pandemic-related tests through fiscal 2022 before stabilizing at a significantly lower level by year end. Despite falling demand for COVID-19 tests, we were pleased to see Hologic’s breast health and non-pandemic molecular diagnostics grow at 8% and 10%, respectively, year over year. We remain confident in the firm’s narrow economic moat, especially thanks to the expanded installed base of Panther diagnostic platforms.