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What's in the Cards for Genomic Health (GHDX) in Q4 Earnings?

Zacks Equity Research

Genomic Health, Inc. GHDX is scheduled to report fourth quarter and 2018 results on Feb 20, after market close.

Last quarter, the company reported the adjusted earnings per share of 35 cents in comparison to the Zacks Consensus Estimate of 7 cents, posting a positive earnings surprise of 400%. Moreover, Genomic Health beat the Zacks Consensus Estimate in three of the last four quarters, the average being 302.6%.

The fourth-quarter results are expected to show steady growth in Product revenues. Let’s take a look at how things are shaping up prior to this announcement.

Oncotype DX Breast Cancer Test in Focus

So far, Genomic Health has been witnessing healthy progress with regard to establishing coverage for its Oncotype DX breast cancer test.

Genomic Health, Inc. Price and EPS Surprise


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

The company has witnessed a series of developments for its Oncotype DX Breast Recurrence Score tests of late. In this regard, Genomic Health recently announced a positive development with regard to the newly updated National Comprehensive Cancer Network (NCCN) 2018 guidelines for invasive breast cancer chemotherapy treatment. Per the company, its Oncotype DX Breast Recurrence Score test has been identified as the only "preferred" test for making decisions regarding chemotherapy treatment for patients suffering from node-negative early-stage breast cancer.

Furthermore, Oncotype DX has been elevated into the algorithm for chemotherapy treatment of patients with micrometastases and one to three positive lymph nodes.

During the third quarter, Genomic Health saw a 10% year over year rise in Oncotype DX test results. Notably, presentation and publication of the TAILORx study results drove test volumes on a year-over-year basis. The company is expected to continue to gain from from the implementation of both revised PAMA reimbursement rate, AJCC staging criteria and presentation and publication of the TAILORx study results in the to-be-reported quarter.

Genomic Health expects U.S. invasive breast cancer revenues to continue to grow in mid-to-high teens in the fourth quarter of 2018.

Other Factors at Play

Prostate Cancer Business Drives Growth

Genomic Health’s U.S. prostate cancer business consistently accelerated over the last few quarters. The company has seen increased adoption of this test on private reimbursement. Per management, the company continues to be the market leader in low-risk and intermediate-risk prostate cancer treatment, courtesy of its test volume performance over the last several quarters. The company has also been witnessing continued expansion in reimbursement coverage in Western Europe.

Genomic Health currently anticipates revenue growth of more than 50% in Oncotype DX Genomic Prostate Score (GPS) test and test volume growth of approximately 24% for 2018. Rising reimbursement from private payers following strengthened NCCN guidelines are expected to drive the upside. Furthermore, the company continues to expect contributions from increasing adoption of Oncotype DX AR-V7, launched in February 2018, for prostate cancer.

So far, the company has successfully expanded private coverage for the Oncotype DX GPS test. Currently, more than 100 million of U.S. covered lives, including Medicare, fall under the scope of Oncotype DX GPS test for early-stage breast cancer.

Solid Estimates

The Zacks Consensus Estimate for fourth-quarter 2018 adjusted earnings of 30 cents reflects an improvement of 275% from the year-ago quarter.

The Zacks Consensus Estimate for revenues is pegged at $101.8 million, showing an increase of 16.4% year-ago quarter.

Guidance Strong

The company has updated the guidance for 2018. Genomic Health now expects full-year revenues in the range of $389-$391 million as against the prior $366-$382 million, reflecting growth of 17% (from 10-15% growth stated earlier). The Zacks Consensus Estimate for 2018 revenues of $391.3 million is near the high end of the guided range.

What Our Model Suggests

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Genomic Health has a Zacks Rank #2 and an Earnings ESP of 0.00%, a combination that does not conclusively show an earnings beat.

The Zacks Consensus Estimate for earnings of $1.11 reflects a 14.4% rise on a year-over-year basis.

Stocks Worth a Look

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat in their upcoming quarterly results.

Masimo Corporation MASI has an Earnings ESP of +1.04% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CVS Health Corporation CVS has an Earnings ESP of +3.29% and a Zacks Rank #3.

Wright Medical Group N.V. WMGI has an Earnings ESP of +58.24% and a Zacks Rank #2.

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