Medical technology company Hologic (NASDAQ: HOLX) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 1.2% year on year to $1.01 billion. The company expects next quarter’s revenue to be around $1.01 billion, close to analysts’ estimates. Its non-GAAP profit of $1.03 per share was 1.4% above analysts’ consensus estimates.

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StockStory’s Take

Hologic’s first quarter results for 2025 were shaped by steady performance in its core diagnostics business and a rebound in its skeletal health segment. Management attributed revenue trends to ongoing strength in molecular diagnostics—particularly the BV/CV/TV assay—and improved supply for its DEXA systems, while also acknowledging headwinds from reduced HIV testing in Africa and lower capital equipment demand in breast health. CEO Steve MacMillan pointed to elevated recurring service revenue and the positive impact of recent acquisitions, such as Endomagnetics and Gynesonics, as supporting overall stability.

Looking ahead, management’s guidance reflects cautious expectations due to newly imposed tariffs, persistent geopolitical uncertainty in China, and funding cuts in Africa. CFO Karleen Oberton explained that these factors directly influenced the reduction in full-year adjusted EPS guidance, while revenue guidance was maintained at the midpoint due to partial offsets from currency effects. The company’s focus remains on mitigating tariff-related costs, driving commercial execution in breast health, and leveraging a diversified product portfolio to support future growth.

Key Insights from Management’s Remarks

Hologic’s management emphasized several operational and market dynamics that shaped Q1 results and the company’s outlook for the remainder of 2025.

• Diagnostics growth and headwinds: The diagnostics division saw continued expansion in molecular diagnostics, with the BV/CV/TV assay and Biotheranostics oncology products noted as major contributors. However, these gains were partially offset by weaker HIV testing volumes in Africa due to funding cuts, and by ongoing softness in China tied to geopolitical challenges.

• Breast health restructuring: Leadership highlighted a reorganization of the breast health sales force, splitting capital and disposable sales responsibilities to sharpen commercial focus. The company also launched an end-of-life replacement strategy for older gantry systems, aiming to drive upgrades and recurring service revenue. Direct sales of Endomagnetics products in North America were cited as a key initiative.

• Surgical and skeletal recovery: The surgical division posted modest organic growth, supported by international expansion and the integration of Gynesonics. Skeletal health rebounded as DEXA system supply constraints eased, though management cautioned that this catch-up effect is unlikely to repeat in upcoming quarters.

• Tariff exposure and mitigation: Management outlined exposure to new U.S. tariffs on products manufactured in Costa Rica and China, estimating a quarterly gross headwind of $20–$25 million. The company is pursuing mitigation efforts but expects limited pricing flexibility in the near term due to long-term contracts. Most manufacturing for diagnostics and breast health remains U.S.-based, limiting broader exposure.

• Cash flow and capital allocation: Hologic generated $169.5 million in operating cash for the quarter and closed the Gynesonics acquisition. The company continues to prioritize tuck-in acquisitions and share repurchases, underpinned by a strong balance sheet and low leverage.

Drivers of Future Performance

Management’s outlook for the rest of 2025 centers on tariff impacts, international market uncertainty, and targeted commercial execution across core businesses.

• Tariff-related cost pressures: Newly imposed tariffs on products from Costa Rica and China will increase cost of goods sold, especially in the second half of the year. Management expects this to weigh on margins, with only partial offsets from cost mitigation efforts.

• Geopolitical and funding headwinds: Lower revenue from China and reduced HIV testing in Africa are expected to persist, reflecting geopolitical challenges and shifts in global health funding. Management has largely derisked these markets in its forecasts but notes the potential for further volatility.

• Breast health commercial initiatives: The company’s strategic focus on gantry system upgrades, expansion of the service revenue base, and direct selling of Endomagnetics products is intended to support a return to growth in breast health by the fourth quarter. Management believes these initiatives will be key to offsetting market headwinds and driving long-term performance.

Top Analyst Questions

• Patrick Donnelly (Citi): Asked about potential supplier price increases tied to tariffs and how mitigation strategies could affect costs. Management responded that supplier discussions are ongoing but do not expect dramatic impacts, with the main focus on offsetting Costa Rica-related tariffs.

• Tejas Savant (Morgan Stanley): Probed the precise drivers behind the lowered organic revenue outlook, beyond tariffs and China. CFO Karleen Oberton clarified that increased weakness in Africa and slight adjustments to China revenue were primary factors.

• Jack Meehan (Nephron Research): Sought details on China revenue declines by segment. CEO Steve MacMillan indicated the majority of the reduction comes from diagnostics, with the decision made to further derisk Chinese exposure.

• Puneet Souda (Leerink Partners): Asked about supply chain flexibility amid tariffs and the capital spending outlook for hospitals ahead of new gantry launches. Management stated they are satisfied with existing U.S. and Costa Rica manufacturing and expect hospitals to maintain purchasing due to the value proposition of new products.

• Casey Woodring (J.P. Morgan): Inquired about the drivers of 12% service revenue growth and future expectations. Management cited strong execution in service contracts, higher attach rates, and Biotheranostics contributions, with growth largely in line with internal forecasts.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the effectiveness of Hologic’s mitigation strategies for tariff-related cost increases, (2) commercial execution in breast health—including uptake of gantry upgrades and direct sales of Endomagnetics products, and (3) stabilization of international markets, especially regarding funding trends in Africa and demand in China. Updates on new product launches and integration of recent acquisitions will be critical to evaluating progress toward management’s growth targets.

Hologic currently trades at a forward P/E ratio of 12.5×. Should you load up, cash out, or stay put? The answer lies in our free research report.

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