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Here's Why Investors Should Hold Exact Sciences (EXAS) Stock

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Exact Sciences Corporation (EXAS - Free Report) is gaining from continued strength across the Screening and Precision Oncology businesses. The company’s earnings and revenues for the second quarter of 2022 surpassed the Zacks Consensus Estimate. The impressive Cologuard volume growth buoys optimism. A promising solvency position is an added advantage. However, mounting expenses and stiff competition do not bode well.

In the past year, this Zacks Rank #3 (Hold) stock has lost 65.1% compared with a 40.4% decline of the industry It belongs to and a 17.2% decline of the S&P 500 composite.

The renowned global medical device company has a market capitalization of $5.66 billion. Its net loss of 94 cents per share in the second quarter was narrower than the Zacks Consensus Estimate of a loss of $1.07.

The company’s long-term expected growth rate of 19.6% compares with the industry’s growth projection of 18.1% and the S&P 500’s estimated 11.2% increase.

Let’s delve deeper.

Key Drivers

Q2 Upsides: Exact Sciences exited the second quarter of 2022 with better-than-expected results. The decline in quarterly loss compared with the year-ago period is encouraging. Robust revenues from the Screening and Precision Oncology segments contributed to the second-quarter top line. The legacy Screening business was driven by impressive Cologuard volume growth and contributions from the PreventionGenetics, Biomatrica and Oncoguard Liver products. The growing uptake of the Oncotype DX Breast and therapy selection products also instills optimism.

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Advancing New Solutions: Exact Sciences is planning several key milestones to bring six innovative cancer diagnostics from its pipeline to patients in need. In this regard, the company made noteworthy progress in enrolling cases to power the prospective BLUE-C study in the second quarter. The results from the BLUE-C trial are anticipated to support FDA submissions for Cologuard 2.0 — the next-generation Cologuard and colon blood tests.

Exact Sciences has also initiated a study with the West German Study Group to validate its tumor-informed ctDNA liquid biopsy test’s ability to identify minimum residual disease in hormone receptor (HR)-positive, HER2-negative early breast cancer patients.

Overall Strong Solvency: Exact Sciences exited the second quarter with cash and cash equivalents and marketable securities of $728 million. The company reported long-term debt of $50 million on its balance sheet at the end of second-quarter 2022, much lower than its current short-term cash level, indicating a good solvency position. This is good news, particularly during an overall tough macroeconomic scenario when the company is facing a global manufacturing and supply halt.


Escalating Costs: In the second quarter, Exact Sciences’ sales and marketing expenses increased 10.8%. General and administrative expenses rose 8.4% year over year. These mounting expenses pushed up adjusted operating costs by 7.5%, resulting in an adjusted operating loss in the quarter, weighing significantly on the company’s bottom line.

Persistent COVID-19 Impacts: The Screening and Precision Oncology businesses have been negatively impacted by the ongoing COVID-19 pandemic. The company expects any future COVID outbreaks to diminish access to healthcare provider offices. Further, pandemic-led cost inflation and supply-chain disruptions continue to impact the company’s operations.

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. The company is aware of at least 13 firms, including Epigenomics AG, EDP Biotech Corporation, etc., which have developed or are developing liquid biopsy tests for colorectal cancer detection.

Estimate Trend

In the past 90 days, the Zacks Consensus Estimate for Exact Sciences’ loss for 2022 has moved down from $4.27 to $4.22.

The Zacks Consensus Estimate for 2022 revenues is pegged at $2.01 billion, suggesting a 13.9% rise from the 2021 reported number.

Key Picks

Some better-ranked stocks in the broader medical space are ShockWave Medical (SWAV - Free Report) , McKesson (MCK - Free Report) and Semler Scientific . While ShockWave Medical sports a Zacks Rank #1 (Strong Buy), McKesson and Semler Scientific carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Estimates for ShockWave Medical have improved from earnings of $10.41 to $11.26 for 2022 and $7.94 to $8.30 for 2023 in the past 60 days. SWAV stock has gained 41.4% so far this year.

ShockWave Medical delivered an earnings surprise of 180.1%, on average, in the last four quarters.

McKesson’s earnings per share estimates increased from $23.26 to $24.25 for fiscal 2023 and $25.41 to $26.04 for fiscal 2024 in the past 60 days. MCK has gained 38.1% so far this year.

McKesson delivered an earnings surprise of 13.00%, on average, in the last four quarters.

Estimates for Semler Scientific’s earnings per share increased from $1.37 to $1.58 for 2022 and $2.39 to $2.42 for 2023 in the past 60 days. SMLR has declined 59.9% so far this year.

Semler Scientific has an earnings yield of 4% against a negative yield for the industry.

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