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Accuray (ARAY) Q1 Wider Than Expected, FY20 View Retained

Zacks Equity Research

Accuray Incorporated ARAY reported first-quarter fiscal 2020 adjusted loss of 11 cents per share, wider than the Zacks Consensus Estimate of a loss of 10 cents. The company had reported a loss of 11 cents in the year-ago quarter.

Net revenues of this Zacks Rank #3 (Hold) company totaled $89.6 million, missing the Zacks Consensus Estimate by 4.03%. On a year-over-year basis, revenues dropped 6.5%.

Fiscal Q1 Details

Product Revenues: Product revenues fell 9.4% year over year to $37.6 million in the reported quarter.

Service Revenues: Service revenues totaled $52 million, down 4.3% from the year-ago quarter.

Gross Order Update: Gross orders in the fiscal first quarter totaled $78.5 million, up 27.8% year over year. The upside was driven by strong demand for Radixact, CyberKnife and TomoTherapy platforms. Radixact accounted for more than 60% of the gross orders. Both EMEA and China made significant contributions to gross orders in the quarter.

Accuray Incorporated Price, Consensus and EPS Surprise

 

Accuray Incorporated Price, Consensus and EPS Surprise

Accuray Incorporated price-consensus-eps-surprise-chart | Accuray Incorporated Quote

Margins

Gross profit in the fiscal first quarter totaled $32.9 million, down 13% on a year-over-year basis. Gross margin was 36.8%, highlighting a contraction of 270 basis points (bps) year over year.

Research and development expenses contracted 3.9% year over year to $13.3 million. Selling and marketing expenses declined 1.8% to $13.3 million. General and administrative expenses contracted 32% to $10.6 million.

First-quarter operating loss was $4.3 million compared with a loss of $4.7 million in the year-ago quarter.

Cash Position

The company exited first-quarter fiscal 2020 with total cash, cash equivalents, and short-term restricted cash of $86.7 million, compared with $87 million at the end of Jun 30, 2019.

Guidance

For fiscal 2020, Accuray continues to expect revenues within $410-$420 million. The Zacks Consensus Estimate for the same is pegged at $435.4 million, above the guided range.

However, management expects revenue decline of 5-6% on a year-over-year basis in the first half of fiscal 2020 and solid revenue growth in the second half of fiscal 2020.

Adjusted EBITDA for fiscal 2020 is expected within $19-$24 million.

Our Take

Accuray exited the fiscal first quarter on a weak note despite solid demand for the Radixact, CyberKnife and TomoTherapy platforms. We are also upbeat to note that this was the company’s fifth consecutive quarter of double-digit growth in gross orders, which was driven by continued strength in China and EMEA. Accuray retained its fiscal 2020 guidance.

On the flip side, year-over-year decline in the top line is concerning. In fact, Accuray’s segmental revenues were soft in the quarter. Gross margin contracted significantly. Accuray also expects a year-over-year revenue decline in the first half of fiscal 2020.

Earnings of Other MedTech Majors at a Glance

Some better-ranked companies, which posted solid results this earnings season, are Edwards Lifesciences EW, Thermo Fisher Scientific Inc. TMO and ResMed Inc. RMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Edwards Lifesciences delivered third-quarter 2019 adjusted earnings per share (EPS) of $1.41, outpacing the Zacks Consensus Estimate by 15.6%. Net sales of $1.09 billion surpassed the Zacks Consensus Estimate by 5.5%.

Thermo Fisher delivered third-quarter 2019 adjusted EPS of $2.94, which surpassed the Zacks Consensus Estimate by 2.1%. Revenues of $6.27 billion outpaced the Zacks Consensus Estimate by 1.3%.

ResMed reported fiscal first-quarter 2020 adjusted EPS of 93 cents, which beat the Zacks Consensus Estimate of 87 cents by 6.9%. Revenues were $681.1 million, surpassing the Zacks Consensus Estimate by 3.6%.

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