Hologic Earnings: Nonpandemic Product Lines Push the Firm's Growth to an Inflection Point

Hologic’s fiscal third-quarter results were another unsurprisingly mixed bag, putting the firm largely on track to meet our full-year expectations, and we’re holding steady on our $70 fair value estimate for now. As expected, further weakening demand for COVID-19 testing posed a headwind, while nonpandemic molecular diagnostic tests saw solid growth. We think this quarter was an inflection point though—for the first time in seven quarters, the declines in COVID test revenue were almost fully offset by the firm’s remaining nonpandemic businesses, which displayed particular strength in the breast health and gynecological surgical product lines. We continue to think both the diagnostics and breast imaging businesses benefit from switching costs that support Hologic’s narrow economic moat.