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Genomic Health Raised to Buy on Better-than-Expected Q2

Zacks Equity Research


On Aug 12, 2014, Zacks Investment Research upgraded Genomic Health Inc. ( GHDX) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold).


Reasons for the Upgrade


Shares of this California-based healthcare solutions provider have been trailing upward since it reported decent financial results for the second quarter of 2014 on Aug 7.


The company delivered better-than-expected second-quarter 2014 results with the top line beating the Zacks Consensus Estimate and the bottom line coming in narrower than the same.


The company reported loss per share of 15 cents, narrower than the Zacks Consensus Estimate of loss of 28 cents, with a positive surprise of 46.4%. Also on a sequential basis, Genomic Health's net loss in the reported quarter was narrower on the back of stronger top-line performance and lower research and development spending.   


Sales grossed $70.5 million, up 10.7% year over year, exceeding the Zacks Consensus Estimate of $69 million. The year-over-year improvement was primarily driven by Genomic Health's solid cash revenue and test growth.


The company's international test results, representing approximately 20% of the total test volume, jumped 32% during the second quarter. The company also experienced 13% growth in worldwide adoption of Oncotype DX in invasive breast cancer.


Throughout the second quarter, Genomic Health experienced an impressive adoption in its prostate cancer tests, which accelerated at a strong rate and resulted in a 54% rise in its overall test volume on a sequential comparison. During the American Urological Association ( AUA.V) annual meeting, the company presented positive results reinforcing the robustness of the Oncotype DX prostate cancer test development. This showed that the test can predict clinical recurrence for all patients regardless of whether they received hormonal therapy, radiation therapy or no therapy at all at the time of biochemical recurrence.


The Zacks Consensus Estimate for loss in 2014 and 2015 are also declining. The Zacks Consensus Estimate for 2014 and 2015 have improved from loss of 88 cents a month ago to 81 cents and from loss of 68 cents to 59 cents, respectively.


Other Stocks to Consider


Genomic Health currently has $868.9 million worth of market capitalization. Some better-ranked stocks in the Med-Biomed/Generic industry include Actelion Ltd. ( ALIOF), Curis, Inc. ( CRIS) and Cytokinetics, Incorporated ( CYTK). All these stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on ALIOF
Read the Full Research Report on GHDX
Read the Full Research Report on CRIS
Read the Full Research Report on CYTK

Zacks Investment Research