HOLX – Base Case iCDS 76bps, Negative Case iCDS 106bps, 2028 4.625% Bond YTW of 5.743%, iYTW of 5.029%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
August 6, 2024
- Credit markets are slightly overstating HOLX’s credit risk with a YTW of 5.743% relative to an Intrinsic YTW of 5.029% and an Intrinsic CDS of 76bps. Furthermore, Moody’s is overstating the company’s fundamental credit risk, with its speculative Ba1 credit rating three notches lower than Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. HOLX’s compensation framework incentivizes management to improve all three value drivers: margins, asset utilization, and growth, which should drive Uniform ROA improvement and increased cash flows available for servicing obligations going forward. In addition, management members are material holders of HOLX equity relative to their annual compensation, indicating they may be well-aligned with shareholders for long-term value creation.
- Earnings Call Forensics™ analysis of the firm’s Q3 2024 earnings call (07/29/2024) highlights that management generated excitement markers when saying core businesses remain on track with their robust performance, that demand for their products and services in breast health remain strong, and that there is still room for growth in their BV CT/TV assay. Furthermore, management is confident their molecular business ex-COVID delivered high-single to double-digit growth in 13 of the last 15 quarters.
