Here's Why Investors Should Retain Accuray (ARAY) Stock Now
Accuray Incorporated ARAY is gaining prominence in the MedTech space, courtesy of a strong international presence and solid demand for its flagship Radixact and CyberKnife platforms. However, a dull view for fiscal 2020 raises concern. The company also faces cutthroat competition in the radiation-oncology space.
Shares Down
Over the past year, shares of this Zacks Rank #3 (Hold) company have plunged 28.6% compared with the industry’s 4.1% decline. The current level also compares unfavorably with the S&P 500 index’s 2.3% rise.
What’s Favoring the Stock?
The Radixact and CyberKnife platforms continue to be major growth drivers for the company.
Radixact recently reported impressive fourth-quarter fiscal 2019 results. Radixact accounted for 60% of gross orders, while CyberKnife represented 40%.
Management is optimistic about Synchrony for Radixact and the VOLO upgrade on CyberKnife, which are expected to expand the company’s installed base.
Additionally, Accuray enjoys a strong overseas presence. For instance, the company received eight orders from China in the fiscal fourth quarter, which totaled $19 million. Management expects strong orders from China in fiscal 2020 as well.
Also, the company saw a rise in gross orders, courtesy of a strong show in the EMEA and APAC regions in the fiscal fourth quarter.
Deterrents
Accuray issued a dull guidance for fiscal 2020, courtesy of the tariffs in China.
Notably, the company expects revenues within $410-$420 million. Per management, Accuray has slashed its guidance by 1.5%. The company expects revenues from EMEA and Japan to remain flat or slightly below the fiscal 2019 levels. In the United States, Accuray expects modest revenue growth in fiscal 2020.
In fact, tariffs in China are also expected to negatively impact the fiscal 2020 gross margins by 150 basis points.
Apart from this, Accuray is exposed to stiff competition in the radiation oncology market from bigwigs like Varian Medical VAR and Elekta AB among others.
Accuray Incorporated Price and Consensus
Accuray Incorporated price-consensus-chart | Accuray Incorporated Quote
Which Way Are Estimates Headed?
The Zacks Consensus Estimate for first-quarter fiscal 2020 bottom line is pegged at a loss of 10 cents. The same for revenues stands at $93.3 million.
For fiscal 2020, the Zacks Consensus Estimate for the bottom line is pinned at a loss of 14 cents, mirroring an improvement of 6.7%. The same for revenues is pegged at $417.7 million.
Key Picks
A few better-ranked stocks in the broader medical space are Stryker Corporation SYK and Masimo Corporation MASI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker’s long-term earnings are expected to grow 10%.
Masimo’s long-term earnings are estimated to rise 20.5%.
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