Hologic Inc. HOLX is slated to report third-quarter fiscal 2017 financial results on Aug 2, after the closing bell.

Last quarter, the company delivered a positive earnings surprise of 8.7%. Notably, Hologic’s earnings surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 5.79%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Hologic witnessed a lackluster performance at its Diagnostics segment in the last reported quarter on poor Cytology and perinatal sales. Particularly, longer cervical cancer screening guidelines intervals are playing spoilsport here. With the issue still to factor into the company’s performance, we expect this segment to continue to perform dull in the upcoming quarter.

We are also worried about the fact that Hologic’s blood screening divestiture is expected to impede the company’s growth momentum in the days ahead. We expect this to get reflected through the company’s financial performance in the yet-to-be-reported quarter itself.

Hologic had to face several challenges owing to unfavorable foreign currency impact that has been affecting the company’s overall performance over the past few quarters. In 2017, foreign exchange headwind is expected to result in reduction of over $20 million.

Escalating operating expenses and intense competition, particularly in the tomosynthesis market, continue to be concerns for Hologic. For quite some time now, the company witnessed several challenges such as restricted capital spending environment, economic uncertainties in Europe, slower sales cycles and increasing pricing pressure. We expect these problems to linger in the upcoming quarters as well.

The company should get significant synergy benefits in the third quarter from the integration of Cynosure, Inc., a medical aesthetics systems and technologies company, which Hologic acquired in Mar 2017.  To mention, the U.S. FDA has recently granted an expanded clearance for Cynosure’s non-invasive body contouring product, Sculpture, to treat the back and inner and outer thighs.

Coming to product launches, in the third quarter, the company received European CE mark for its new Panther Fusion system and Panther Fusion assays for flu and respiratory testing. Also, the company announced the U.S. FDA approval of itsGenius 3D Mammography exam. These along with several other product launches should also boost the upcoming quarterly results.

Overall, for third-quarter fiscal 2017, Hologic expects revenues of $790–$805 million (as compared to the prior guidance of $675–$685 million). The current Zacks Consensus Estimate for third-quarter revenues is $798.9 million, within the company’s expectations.

Adjusted EPS is projected at 48 cents–50 cents (beyond the high end of the previous 48 cents–46 cents range). The current Zacks Consensus Estimate for third-quarter adjusted EPS is pegged at 49 cents, within the company’s guidance.

Earnings Whispers

Our proven model does not conclusively show that Hologic is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Hologic has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 49 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Hologic has a Zacks Rank #4. Note that we caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider, as our model shows that they have the right combination of elements to come up with an earnings beat this quarter:

Dextera Surgical Inc. DXTR has an Earnings ESP of +9.09% and a Zacks Rank #2.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +0.44% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX Laboratories, Inc. IDXX has an Earnings ESP of +1.19% and a Zacks Rank #2.

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