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Accuray, Inc. (ARAY)

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We upgrade our recommendation on Accuray Inc. (ARAY) to Outperform following our assessment of its healthy second-quarter fiscal 2011 results and increased visibility on the stock. Earnings per share of $0.07 comfortably beat the Zacks Consensus Estimate of a loss of $0.02.

The company swung to profit in the quarter as a decline in operating expenses offset lower revenues. Accuray continues to enjoy strong demand for its CyberKnife robotic radiosurgery as reflected by increasing number of patients treated with the system.

Moreover, the company is expected to benefit from the recent recovery in hospital capital spending. We are also upbeat about the compelling prospect in radiation oncology rendered by the company's impending acquisition of rival TomoTherapy.

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