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Accuray Wins 7 TomoTherapy Orders from NHS, Stock Up

Zacks Equity Research

Shares of Accuray Inc. ARAY increased almost 4% to close at $5.12 on Jun 16, following the news that the company has won seven TomoTherapy System orders from NHS Supply Chain in the U.K. This is the largest order from a single customer in the company’s history.

The order win suggests growing usefulness of the TomoTherapy system in providing radiation therapy and radiosurgery treatments. The NHS Supply Chain order also demonstrates continuing strong demand for the TomoTherapy system.

We note that NHS is a bigger organization as compared to the community or regional hospitals that have became the primary customer base for the system in recent times. The win will help Accuray solidify its international footprint over the long haul.

Since the deal has already been recorded as backlog, volumes will increase significantly, which will boost gross orders in the fourth quarter of fiscal 2016. Notably, gross orders increased 9% year over year (18% at constant currency) to $64.9 million in third-quarter 2016.

ACCURAY INC Price and Consensus

ACCURAY INC Price and Consensus | ACCURAY INC Quote

Accuray is now expected to beat its full-year 2016 gross order target of $280 million and $290 million, which was slashed from $295 million at the end of the third quarter. Meanwhile, revenues are forecasted in the range of $395–$405 million.

We believe that continued penetration and market share gains by the TomoTherapy system in single and dual vault accounts will drive gross order growth in fiscal 2017. Additionally, continued momentum in replacement sales and improvement in CyberKnife system sales are expected to drive growth.

Moreover, anticipated 510(k) approval with the FDA for Radixact treatment delivery system (next-generstion TomoTherapy platform), Precision Treatment Planning System and iDMS Data Management System are key catalysts for the long term.

Zacks Rank & Key Picks

Accuray carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical space are CryoLife CRY, IRadimed IRMD and Masimo Corp MASI. All the three stocks sport a Zacks Rank #1 (Strong Buy).

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