Source: Hologic

What: Shares in Hologic (NASDAQ:HOLX) soared higher by 10% earlier today after the company reported better than expected fiscal third quarter financial results after the bell yesterday.

So what: Sales of Hologic's diagnostic, medical imaging, and surgical products increased 9.7% year-over-year to $693.9 in the company's fiscal third quarter.

Importantly, a greater percentage of sales dropped to the bottom line during the quarter because Hologic's operating margin improved 4.7% to 16.7% in the three month period. As a result, Hologic reports that its non-GAAP EPS jumped 16.2% to $0.43 during the quarter, which outpaced analysts estimates for EPS of $0.39.

The company saw the biggest sales increase year-over-year in its breast health products, such as its Genius 3D mammography systems. In constant currency, sales of breast imaging products grew 20% to $279.5 million, gynecological product sales improved 11% to $85.5 million, diagnostics sales were up 7% to $306.9 million, and skeletal health product sales slipped 1.4% to $22 million during the quarter.

Now what: Hologic benefits from the sale of disposables, so a larger installed base of its products benefits its top and bottom line. Last quarter, 61% of the company's sales came from disposables, 23% from capital equipment, and 16% from services, or other sources.

The company should also benefit from a restructuring of its debt, including benefits from its plans to replace its outstanding 6.25% senior notes due in 2020 with proceeds from its recent 5.25% senior notes due in 2022.

Overall, Hologic's solid quarter has the company expecting that it will grow its sales by between 9.1% and 9.5% this fiscal year, up from prior estimates for between 7% and 7.4%, and non-GAAP EPS growth of between 17.1% and 17.8%, up from prior guidance for between 13% and 13.7% growth.

Since Hologic has beat profit expectations in each of the past four quarters, there's a chance that this increased guidance may still prove to be light. If so, then a forward P/E of 23.5 times to own Hologic may not be unreasonable and for that reason this could be one worth considering for portfolios. 

 
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.