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Genomic Health (GHDX) Q1 Earnings Top Estimates, Margins Up

Zacks Equity Research

Genomic Health, Inc. GHDX delivered first-quarter 2019 earnings per share (EPS) of 34 cents against the year-ago net loss of 11 cents. The bottom line also surpassed the Zacks Consensus Estimate by 17.2%.

Revenues in Detail

Total revenues in the first quarter rose 17.4% year over year to $108.8 million, beating the Zacks Consensus Estimate by 1.6%. At constant currency (cc), revenues shot up 18%.

Growth in the United States and international markets drove the top line. A solid U.S. invasive breast cancer revenue uptick was also recorded.

Geographically, first-quarter product revenues in the United States rose 15.4% to $91 million. The U.S. product revenue rise was fueled by a 12.5% rise in U.S. invasive breast revenues from Oncotype DX Breast Recurrence Score tests and a 46.6% surge in U.S. prostate test revenues from Oncotype DX Genomic Prostate Score (GPS) tests.

Genomic Health, Inc. Price, Consensus and EPS Surprise

 

Genomic Health, Inc. Price, Consensus and EPS Surprise | Genomic Health, Inc. Quote

International product revenues totaled $17.8 million in the reported quarter, up 29% year over year (up 32.9% at adjusted constant currency).

During the first quarter, the company delivered more than 37,580 Oncotype DX test results, up 15.9% year over year.

Margin Trend

Genomic Health’s gross margin expanded 460 basis points (bps) year over year to 84.4% in the first quarter.

The company also saw a 2.5% escalation in operating expenses to $80.2 million on an 8.6% rise in selling and marketing expenses to $45.3 million and a 0.5% increase in general and administrative expenses to $19.8 million. However, research and development expenses declined 10.4% to $15.1 million.

In the reported quarter, Genomic Health’s operating profit came in at $11.5 million against the year-ago operating loss of $4.4 million. Operating margin expanded a huge 1535 bps to 10.6% in the quarter.

Financial Update

Genomic Health exited first-quarter 2019 with cash and cash equivalents and short-term marketable securities of $206 million, showing a decline from $209.7 million at the end of 2018.

Our Take

Genomic Health ended the first quarter on a promising note as earnings and revenues surpassed estimates.

We are also encouraged by the year-over-year rise in revenues, driven by solid performances in the United States and internationally. Within the prostate cancer space, the company is witnessing a robust improvement in volume as Oncotype DX GPS test results consistently lead the market in low- and intermediate-risk prostate cancer test adoption. Expansion of both margins raises optimism.

The company also witnessed increasing global demand for Oncotype DX Breast Recurrence Score test usage. Management is optimistic about achieving double-digit revenue growth in the year with consistent growth across key product segments. It also anticipates the national reimbursement decision in Germany for the Oncotype DX breast cancer test.

However, Genomic Health’s heavy reliance on the Breast Oncotype DX test raises concern.

Zacks Rank & Key Picks

Genomic Health currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks with solid results this earnings season are Stryker Corporation SYK, DENTSPLY SIRONA XRAY and CONMED Corporation CNMD, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker delivered first-quarter 2019 adjusted EPS of $1.88, beating the Zacks Consensus Estimate by 2.2%. Meanwhile, revenues of $3.52 billion were in line with the consensus estimate.

DENTSPLY reported adjusted EPS of 49 cents in the first quarter of 2019, beating the Zacks Consensus Estimate of 38 cents. Revenues came in at $946.2 million and surpassed the Zacks Consensus Estimate of $917.1 million.

CONMED posted first-quarter 2019 adjusted EPS of 57 cents, which exceeded the Zacks Consensus Estimate of 54 cents. Also, revenues of $218.4 million outshined the consensus mark of $213 million.

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