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Here's Why You Should Hold on to Exact Sciences (EXAS) Stock

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Exact Sciences Corporation (EXAS - Free Report) is well-poised for growth, backed by impressive first-quarter 2022 results. Further, the company’s legacy Screening business is witnessing significant improvement, buoyed by Cologuard volume growth. However, escalating costs and stiff competition are concerning.

Year to date, shares of this Zacks Rank #3 (Hold) company have lost 31.7% compared with the industry’s 23.8% decline. The S&P 500 fell 18.6% 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 $9.36 billion. The company projects 23.7% growth for the next year.

Riding on its current business growth and bullish near-term prospects, the stock is worth holding on to for now.

Key Growth Catalysts

Q1 Upsides:  Exact Sciences exited the first quarter of 2022 on a bullish note, with better-than-expected results. Robust revenue growth in the Screening and Precision Oncology segments contributed to the first-quarter top line.

Meanwhile, the Precision Oncology business saw an improvement in revenues due to significant Oncotype DX breast volume growth. The Precision Oncology team checked a record number of patients with the Oncotype DX breast test in the first quarter, delivering life-changing information to more than 40,000 people.

The company’s latest agreement to acquire OmicEra Diagnostics, a Germany-based emerging leader in proteomics, and biomarker discovery, buoys optimism.

Cologuard Enhancement: The company is currently focusing on three areas to enhance Cologuard growth.

In first-quarter 2022, the company saw an increase in the number of completed Cologuard tests, led by enhanced productivity within the sales team, an increase in patients being rescreened with the Cologuard test. The growing number of first-time Cologuard users in the 45-49 age group and higher electronic ordering rates also contributed to the rise.

 

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To spread awareness about the importance of early detection, the company collaborated with Katie Couric on a national campaign titled “Mission to Screen” in March 2022. The campaign will advocate the urgent need for individuals to get screened for colon cancer.

Bullish Outlook: The company expects revenues of $1,985-$2,032 million (an improvement from the earlier mentioned $1,975-$2,027 million) for 2022. The Zacks Consensus Estimate for the same is pegged at $2.01 billion.

For 2022, the company expects Screening revenues of $1,350-$1,372 million (compared with the aforementioned $1,340-$1,367 million). It reaffirmed its guidance for Precision Oncology revenues at $595-$610 million. The company also maintained its outlook for COVID-19 testing revenues at $40-$50 million.

Downsides

Escalating Costs:  In the first quarter, Exact Sciences’ gross margin contracted on a 22.5% uptick in the cost of sales. Meanwhile, sales and marketing expenses increased 24.7% year over year in the quarter under review. These escalating costs are building pressure on the company’s bottom line.

Tough Competitive Landscape: Given the large market for colorectal cancer screening, Exact Science faces numerous competitors, some 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 narrowed from a loss of $4.33 to a loss of $4.26.

The Zacks Consensus Estimate for its second-quarter 2022 revenues is pegged at $498.5 million, suggesting 14.6% growth from the year-ago reported number.

Key Picks

A few better-ranked stocks in the broader medical space are UnitedHealth Group Incorporated (UNH - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and Alkermes plc (ALKS - Free Report) .

UnitedHealth, with a Zacks Rank #2 (Buy), reported first-quarter 2022 earnings per share (EPS) of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.