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Exact Sciences (EXAS) Down 25.3% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Exact Sciences (EXAS). Shares have lost about 25.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Exact Sciences due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Exact Sciences Q2 Earnings Top Estimates, Margins Down

Exact Sciences Corporation reported a net loss of 94 cents per share in second-quarter 2022, narrower than the net loss of $1.03 per share in the year-ago quarter. The metric was also narrower than the Zacks Consensus Estimate of a loss of $1.07.

Our model projected a net loss of $1.06 cents in the second quarter.

Revenues in Detail

Second-quarter consolidated revenues were $521.6 million, up 19.9% year over year. The metric exceeded the Zacks Consensus Estimate by 5%.

The second-quarter revenue compares to our own estimate of $495.6 million.

Segments in Detail

Screening revenues, including laboratory service revenues from Cologuard, PreventionGenetics, and immaterial revenues from Biomatrica products, were $353.9 million, reflecting a year-over-year increase of 34%. The upside was driven by impressive contributions from PreventionGenetics and Cologuard volume growth. In the quarter, 9,000 new healthcare providers ordered Cologuard.

For the Screening segment, we projected $342 million of revenues in the second quarter.

Precision Oncology revenues, including laboratory service revenues from global Oncotype products and therapy selection products, were $154 million, up 11.8% year over year.

For the Precision Oncology segment, we projected $147.4 million of revenues in the second quarter.

Revenues from COVID-19 testing totaled $13.8 million, down 58% year over year.

This figure compares to our COVID-19 testing estimate of $6.2 million for Q2.

Margin

In the quarter under review, Exact Sciences’ gross profit (excluding the amortization of acquired intangibles) rose 17.5% to $377 million. The gross margin contracted 151 basis points (bps) to 72.3%.

Research and development expenses contracted 0.1% year over year to $106.1 million. Sales and marketing expenses increased 10.8% to $215.9 million. General and administrative expenses rose 8.4% year over year to $181.7 million.

Adjusted operating expenses were $503.7 million in the second quarter, up 7.5% year over year. Adjusted operating loss totaled $126.6 million, narrower than the year-ago operating loss of $147.8 million.

Financial Update

Exact Sciences exited second-quarter 2022 with cash and cash equivalents and marketable securities of $728 million compared with $816.9 million at the end of the first quarter of 2022.

The company reported long-term debt of $50 million on its balance sheet at the end of second-quarter 2022.

2022 Outlook

The company now expects revenues in the range of $1,980-$2,022 million (compared to the earlier projected range of $1,985-$2,032 million) for 2022. The Zacks Consensus Estimate for the same is pegged at $2.02 billion.

For 2022, the company has reaffirmed its Screening revenues expectation in the range of $1,350-$1,372 million. The company now expects Precision Oncology revenues in the range of $580-$590 million (earlier projection $595-$610 million). The company has also updated its outlook for COVID-19 testing revenues in the band of $50-$60 million (up from the prior projection of $40-$50).

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Exact Sciences has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Exact Sciences has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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