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Genomic Health (GHDX) Q4 Earnings Beat Estimates, Margins Up

Zacks Equity Research

Genomic Health, Inc. GHDX delivered fourth-quarter 2018 adjusted earnings per share (EPS) of 32 cents, higher than the year-ago adjusted EPS of 8 cents. The bottom line also surpassed the Zacks Consensus Estimate by 6.7%.

Reported EPS came in at 23 cents per share, comparing favorably with the year-earlier figure of 5 cents.

For the full year, adjusted earnings were $1.06 versus the prior-year loss of 5 cents per share. Meanwhile, the same came in line with the Zacks Consensus Estimate.

Revenues in Detail

Total revenues in the fourth quarter rose 19.6% year over year to $104.6 million, beating the Zacks Consensus Estimate by 2.8%. The top line also improved 22% on a year-over-year basis compared with pre-ASC 606 adjusted revenues of $85.7 million for the fourth quarter of 2017.

Genomic Health, Inc. Price, Consensus and EPS Surprise

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

For 2018, revenues were $394.1 million as compared to pre-606 adjusted revenues of $334.0 million a year ago, reflecting an increase of 18%.

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

Geographically, fourth-quarter product revenues in the United States rose 23% to $88.6 million from the year-ago pre-606 adjusted revenues. The U.S. product revenue rise was fueled by a 22% rise in U.S. invasive breast revenues from Oncotype DX Breast Recurrence Score tests and a 48% surge in U.S. prostate test revenues from Oncotype DX Genomic Prostate Score (GPS) tests.

International product revenues totaled $16 million in the reported quarter, up 19% year over year (up 21% at adjusted constant currency) from the year-ago pre-606 adjusted tally.

During the fourth quarter, the company delivered more than 35,530 Oncotype DX test results, up 11% year over year.

Margin Trend

Genomic Health’s gross margin expanded 79 basis points (bps) year over year to 84.9% in the fourth quarter.

The company also saw an 11.1% escalation in operating expenses to $79.5 million on a 16.7% rise in selling and marketing expenses to $42.6 million and a 0.9% increase in general and administrative expenses to $20.2 million. However, research and development expenses declined 11.4% to $16.4 million.

In the reported quarter, Genomic Health’s operating income came in at $9.4 million compared with the year-ago operating income of $2.2 million. Operating margin expanded a huge 655 bps to 9% in the period.

Financial Update

Genomic Health exited 2018 with cash and cash equivalents and short-term marketable securities of $209.7 million, highlighting an improvement from $129.6 million at the end of 2017.

2019 Guidance

Genomic Health has provided its 2019 guidance. The company expects full-year revenues in the range of $436-$448 million, reflecting growth of 11-14% from the year-ago period. The Zacks Consensus Estimate for the metric is pegged at $441.6 million, which is within the guided range.

Our Take

Genomic Health ended 2018 on a promising note.

We are also encouraged by the year-over-year ascent 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 consistently leads the market in low- and intermediate-risk prostate cancer test adoption.

The company also witnessed increasing global demand for Oncotype DX Breast Recurrence Score test. Genomic Health is currently working to broaden its global access and extend business through the development of a sample-to-answer version of the Oncotype DX Breast Recurrence Score test on the IdyllaTM platform.

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

Zacks Rank & Other Key Picks

Genomic Health carries a Zacks Rank #2 (Buy). Other top-ranked medical stocks boasting solid quarterly results are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD. 

Varian reported first-quarter fiscal 2019 adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank of 2. 

AngioDynamics’ second-quarter fiscal 2019 adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, surpassing the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, meeting the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock is a Zacks #2 Ranked player.

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