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Why Is Accuray (ARAY) Up 17% Since Last Earnings Report?

Zacks Equity Research
Illumina (ILMN) closed the most recent trading day at $347.53, moving -1.02% from the previous trading session.

It has been about a month since the last earnings report for Accuray (ARAY). Shares have added about 17% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Accuray due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Accuray's Q2 Loss Narrows, Prospects Bright in China

Accuray reported second-quarter fiscal 2019 adjusted loss of 5 cents per share, narrower than the Zacks Consensus Estimate of a loss of 6 cents. The company had reported a loss of 6 cents in the year-ago quarter.

Net revenues totaled $102.3 million, missing the Zacks Consensus Estimate of $104 million. On a year-over-year basis, revenues climbed 2% in the quarter.

Q2 Details

Product Revenues: Product revenues increased 2% year over year to $48.1 million in the reported quarter on strong demand for the Radixact system.

Service Revenues: Service revenues totaled $54.3 million, up 2% from the year-ago quarter.

Gross Order Update: Gross orders in the second quarter of fiscal 2019 totaled $100.2 million, up 28.6% on a year-over-year basis. Strong demand for Radixact and CyberKnife platforms drove the upside.

Radixact Update

Per management, Accuray’s flagship Radixact System continued to see strong demand in the fiscal second quarter, with gross orders climbing 8% year over year. By the end of the quarter, management received 120 orders for the system, more than half of which came from single or dual vault customer locations.

Additionally, in the reported quarter, Accuray received FDA approval for its 510(k)-application motion synchronization on the Radixact treatment system. The kVCT imaging on Radixact is currently under development.

Margins

Gross profit in the fiscal second quarter totaled $38.4 million, down 2.5% on a year-over-year basis. Gross margin was 37.5% of net revenues, down 170 basis points (bps).

Research and development expenses declined 7% year over year to $13.6 million. Selling and marketing expenses shot up 9.1% year over year to $15.1 million. General and administrative expenses fell 11.5% year over year to $10.5 million.

Second-quarter operating loss was $0.9 million compared with a loss of $1 million in the year-ago quarter.

Guidance Intact

Accuray has kept its fiscal 2019 guidance unchanged.

The company expects product revenue growth between 4% and 8% and service revenue is expected to grow approximately 2%. This is expected to result in total revenue of $415-$425 million, representing year-over-year growth of 3-5%.

Adjusted EBITDA is expected between $23 million to $29 million, representing growth of 35-70% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Accuray has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Accuray has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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