Exact Sciences Corporation ( EXAS Quick Quote EXAS - Free Report) is well poised for growth backed by the Cologuard enhancement and strategic partnerships. Further, the better-than-expected results for the first quarter and bullish 2021 outlook buoy optimism. However, escalating costs and stiff competition are concerning.
Over the past year, shares of this Zacks Rank #3 (Hold) company have gained 36% against the
industry’s 6.3% fall. The S&P 500 rose 42.4% during the same period.
The molecular diagnostics company focused on the early detection and prevention of some of the deadliest forms of cancer has a market capitalization of $18.81 billion. The company projects 15.4% growth for the next year. Further, it surpassed estimates in the trailing four quarters, delivering a surprise of 42.80%, on average.
Riding on the company’s current business growth and bullish near-term prospects, this stock is worth holding on to, for now.
Key Catalysts Solid Q1 Results: Exact Sciences exited the first quarter of 2021 with better-than-expected numbers. The contraction in quarterly loss compared to the year-ago period buoys optimism. Revenues from the COVID-19 tests garnered during the quarter contributed to the first-quarter top line. The company’s legacy Screening business saw an improvement in revenues during the quarter on Cologuard volume growth. Further, the 2021 outlook provided by the company is indicative of the continuation of this bullish trend. Cologuard Enhancement: According to Exact Sciences, with the help of Cologuard, health care providers can prioritize procedures and send patients at the highest risk, including those with a positive Cologuard, to colonoscopy first. Thus, Cologuard can play an important role in reducing backlog. In this regard, during its first-quarter earnings call, Exact Sciences noted that Cologuard is an ideal solution to help address the 46 million Americans that need to be screened. The company also noted that Cologuard 2.0 is designed to enhance an already great test, expanding the company’s opportunities to help patients in colon cancer screening. Genomic Health Merger a Strategic Fit: Built on two of the strongest and fastest growing brands in the cancer diagnostics industry — Cologuard and Oncotype DX — the Genomic Health consolidation has started to gain an even stronger platform for continued growth of Exact Sciences’ marketed products and the development of their robust pipelines. In the first quarter, Exact Sciences announced the completion of PFS Genomics acquisition. PFS Genomics is focused on reducing unnecessary radiotherapy treatment in patients with early stage breast cancer. Downsides Escalating Costs: In the first quarter, sales and marketing expenses rose 10.9%, whereas general and administrative expenses surged 135% year over year. Further, research and development expenses surged a stupendous 165.6% year over year. Tough Competitive Landscape: Given the large market for colorectal cancer screening, Exact Science faces numerous competitors, a few of which possess significantly greater financial and other resources and development capabilities than the company. Estimate Trends
Exact Sciences is witnessing a positive estimate revision trend for the current year. In the past 90 days, the Zacks Consensus Estimate for its bottom line has moved 12.30% north to a loss of $2.85.
The Zacks Consensus Estimate for its second-quarter 2021 revenues is pegged at $421.6 million, suggesting 56.8% growth from the year-ago reported number.
A few better-ranked stocks from the broader medical space are
National Vision Holdings, Inc. ( EYE Quick Quote EYE - Free Report) , Owens & Minor, Inc. ( OMI Quick Quote OMI - Free Report) and Envista Holdings Corporation ( NVST Quick Quote NVST - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
National Vision has a projected long-term earnings growth rate of 23%.
Owens & Minor has a projected long-term earnings growth rate of 15%.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
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