Should You Buy, Sell, or Hold Hologic Stock After Q3 Earnings?

Hologic's Strong Q3 Performance and Outlook

On July 30, Hologic (HOLX) released its third-quarter fiscal 2025 results after the market closed. The U.S. medical equipment manufacturer, which focuses on women’s health, delivered a performance that exceeded expectations. Management is now looking to return to stronger top and bottom-line growth in the fourth quarter, driven by a continued recovery in the Breast Health business and solid performances across other divisions. The company’s balance sheet remains robust, providing ample financial and strategic flexibility. Since the results were announced, shares of Hologic have risen 4.4%.

Despite this recent gain, the stock has declined 5.9% year to date, which is lower than the industry’s 8.8% drop. In comparison, peers such as GE Healthcare (GEHC) and Becton, Dickinson and Company (BDX) have experienced steeper declines.

Hologic’s Q3: A Quick Recap

The company reported revenues of $1.02 billion and adjusted earnings per share (EPS) of $1.08, both surpassing the respective Zacks Consensus Estimate. The Molecular Diagnostics business led the way, with U.S. sales increasing by 7.3% due to strong demand for the BV, CV/TV test, and Panther Fusion assays. As expected, Cytology and Perinatal revenues declined by 2.2% year over year, primarily due to ongoing softness in China.

Overall, Diagnostics saw modest growth of 0.9%. Hologic’s Breast Health revenues dipped by 5.8%, facing its toughest year-over-year comparison. However, revenues of $365.2 million improved from the second quarter and surpassed internal expectations. Interventional sales rose by 31.8% in the third quarter, driven by Endomagnetics. Excluding that, organic interventional sales still grew by 6%.

Growth in GYN Surgical was fueled by a 24.8% increase in the International unit, mainly due to stronger adoption in markets with newly established reimbursements and entry into new regions. Skeletal Health revenues surged by 62.1% as Hologic resumed shipments for the final DXA model and worked through pent-up demand from earlier shipping holds.

The gross margin (non-GAAP) came in at 60.3%, down 80 basis points (bps). The operating margin declined 110 basis points to 30.1%, but it remained among the best in the industry. Hologic generated $343 million in operating cash flow and ended the quarter with cash and short-term investments of $1.88 billion and an adjusted net leverage ratio of 0.6.

Hologic Updates Its 2025 Forecast

Citing a strong third-quarter performance and lower tariff headwinds, the company has raised the midpoints of its 2025 guidance ranges for both top and bottom lines. Revenues are now projected in the range of $4.08-$4.09 billion, and non-GAAP EPS is expected to be between $4.23 and $4.26. The outlook for the divisions also remains largely unchanged, with Diagnostics expected to grow in the mid-single digits, a low-single-digit decline in Breast Health, and Surgical to expand in high-single digits. On the margin front, Hologic still expects gross and operating margins to land in the low 60s and low 30s, respectively.

The Zacks Consensus Estimate for Hologic’s fiscal 2025 earnings has also edged up 0.7% over the past week. The consensus mark for both fiscal 2025 and 2026 top and bottom lines indicates year-over-year growth.

Two Factors Shaping Hologic

Breast Health Rebound Underway: Hologic remains optimistic about the Breast Health division, now led by a new commercial leadership team. The team has refined the end-of-life strategy for older gantries, which is set to have a stronger impact in the coming quarters. In terms of product innovation, the company is preparing to launch the Genius AI Detection PRO solution, which expands on Genius AI Detection 2.0 by providing even greater accuracy and efficiency for radiologists. It will be sold as an upgrade on the 3D system and the next-generation Envision platform upon its launch in 2026. Also, Endomagnetics, now transitioned to an organic part of the business, has enhanced Hologic’s Interventional Breast Surgery portfolio.

Diagnostics Remains a Bright Spot: The company continues to make progress in addressing the wide U.S. vaginitis testing gap with the BV, CV/TV assay — now its second-largest assay globally. Biotheranostics is seeing strong adoption of its breast cancer index test, which helps guide decisions around extended endocrine therapy. Hologic plans to diversify its menu in Panther Fusion sidecar over the next several years by launching an IVD test for GI and hospital-acquired infections. Meanwhile, the Genius digital diagnostics system in Cytology offers workflow advantages that help customers manage growing labor shortages while enabling cervical cancer screening in regions with limited infrastructure.

What Valuation Metric Says About HOLX

HOLX shares are trading at a forward five-year price-to-sales (P/S) of 3.55X, which is discounted compared to the 4.10X industry average. However, it is still more expensive than BD and GEHC, which have sales multiples of 2.26 and 1.55, respectively.

Concerns for HOLX

Hologic faces ongoing macroeconomic volatility, including the implementation of a 10% baseline tariff on all U.S. imports. The company previously estimated a quarterly gross tariff impact of $20-$25 million, with about two-thirds of the amount linked to Costa Rica, where it manufactures most of its surgical and interventional breast health products. Shipments of products to and from China account for the remaining 15%. While it has nearly halved that impact through adjustments to its global supply chain, operating model, and procurement efforts, cost pressures remain.

The company now expects to incur $10-$12 million in tariff costs per quarter in fiscal 2026. Additionally, the international Diagnostics division will continue to be affected by China’s difficult operating environment and reduced funding for the HIV test in Africa.

Final Verdict on HOLX

Hologic’s latest quarterly results highlight its progress toward stronger growth. The underlying strength in Diagnostics, international Surgical momentum, and solid financial stability are promising. Breast Health’s sequential improvement reflects early signs of better commercial execution. While the company has made headway in mitigating tariffs, broader economic challenges will still weigh on its performance. Given the attractive valuation of the Zacks Rank #3 (Hold) stock, existing shareholders may find it prudent to hold, while prospective investors should wait for better visibility before entering.