Morgan Stanley is out with its report today on Hologic HOLX, maintaining Equal-weight.
In a note to clients, Morgan Stanley writes, "Hologic's strategy is sound and we are encouraged by the immediate accretion, but returns on capital are less clear and likely hinge on longer-term maintenance of the channel as new products are approved. The strategic rationale is clear; Hologic needed to improve its emerging market presence.
Building distribution in China organically is challenging and often raises speed to market questions. Lost profitability probably catalyzed this transaction, evidenced by the FY4Q annualized incremental sales of ~$34mn. Hologic was giving away significant profit, which was only going to increase as the market expanded and the company launched 3-4 additional products."
At the time of posting, shares of HOLX were trading at $20.67, down 0.72% from Wednesday's close.
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