NEW YORK (GenomeWeb) – Cowen said today that it has upgraded its rating on Hologic's shares to Outperform from Market Perform, based in part on the investment bank's expectation of "resilient" mid-single-digit or greater than high-single-digit revenue growth for Hologic's molecular diagnostics business.
In a research note, analyst Doug Schenkel said that Cowen's revenue growth expectations were also driven by expected sales for Hologic's new products, and continued mid-single-digit or high-single-digit growth for its surgical business.
Growth drivers combined with around a 10 percent tax rate cut should drive "robust EPS growth that exceeds expectations," over the next three to five years, even if the firm's Cynosure business "continues to come up short of expectations," Schenkel added.
In March, Hologic closed the acquisition of Cynosure for $66 per share in cash, in a deal worth $1.65 billion.
The firm has had several regulatory clearances for its products throughout this year. Earlier this month, for example, the firm announced that the US Food and Drug Administration had granted 510(k) clearance for its Panther Fusion AdV/hMPV/RV assay, a multiplexed test that runs on Hologic's Panther Fusion system.
Still there are risks to the investment bank's call, Schenkel noted, including the potential that the Cynosure business could be much worse than the bank is currently modeling; that pricing and reimbursement pressure could intensify; that the tax reform bill could stall in Washington, DC; and that Hologic would need to maintain a five-year agreement with a large reference laboratory that it inked in mid-2013 in order to ensure the health of its MDx business.
In morning trading on the Nasdaq, Hologic shares were up more than 3 percent to $44.10.