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On Jul 10, we retained Accuray Incorporated (ARAY - Analyst Report) at Neutral, following its dismal fiscal third-quarter results. Both revenues and earnings missed estimates, compelling the company to lower its fiscal 2013 revenue guidance. However, we are encouraged that the radiosurgery systems maker was successful in enhancing product order momentum.

Why the Retention?

Accuray’s third-quarter fiscal 2013 adjusted loss was 37 cents per share, wider than the Zacks Consensus Estimate of a loss of 21 cents. Adjusted revenues for the quarter were $70.6 million (down 30.5% year over year). Results failed to meet the Zacks Consensus Estimate of $78 million.

The company’s earnings have failed to beat the Zacks Consensus Estimates in 3 out of the last 4 quarters with an average negative surprise of 29.49%. Moreover, we expect annualized loss to widen by 29.14% to $1.05 per share in the current fiscal. However, we are encouraged to note that, the next fiscal may witness growth of 67.69% reaching a loss of 34 cents a share.

Internal manufacturing and supply-related issues led to the delay in the launch of its latest technologies and widening of losses. As a result, the company trimmed its fiscal 2013 revenue guidance.

Nonetheless, we appreciate Accuray’s success in improving product order momentum in the last reported quarter, reflecting healthy adoption of new products. Moreover, the company’s restructuring efforts and healthy service gross margin are also helping it to stabilize. We are upbeat about the compelling prospects in radiation oncology rendered by TomoTherapy. The company now has a Zacks Rank #3 (Hold).

Other Stocks to Consider

Medical instrument companies such as Cepheid (CPHD - Analyst Report), Globus Medical (GMED - Snapshot Report) and MAKO Surgical warrant a look. All these stocks carry a Zacks Rank #2 (Buy).

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