Myriad Genetics, Inc. (MYGN Quick QuoteMYGN - Free Report) is scheduled to report its fourth-quarter fiscal 2016 financial results on Aug 9, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 7.89%. Encouragingly, Myriad’s earnings outpaced the Zacks Consensus Estimate in all the past four quarters, with an average beat of 8.70%.

Let’s see how things are shaping up prior to this announcement.

MYRIAD GENETICS Price and EPS Surprise

MYRIAD GENETICS Price and EPS Surprise | MYRIAD GENETICS Quote

Factors at Play

In its last reported third-quarter fiscal 2016, Myriad witnessed substantial progress with respect to advancing its three strategic imperatives in a bid to achieve its long term goals. These strategies included: transition and expansion of the hereditary cancer market, diversification of revenues by commercializing 4 of its 6 new product pipelines and enhancing the company’s international contribution by investing in large countries. We expect to observe the similar trend to continue; once Myriad releases its fiscal fourth quarter results next week.  

Moreover, the company generated hereditary cancer revenues worth $156.3 million during the third quarter, in line with management’s expectation, driven by the reset of healthcare deductibles and the increased number of patients in high deductible plans. Management at Myriad expects these favorable trends to continue in the fourth quarter as well and a consequent sequential growth in the company’s hereditary cancer revenues.

In addition, management no longer expects to witness any negative impact from the new UnitedHealthcare preauthorization process in the fourth quarter as turnaround times for United samples should remain consistent with current levels. Sequential volume growth in Myriad’s Vector DA test is also predicted during the fourth quarter.

On the flip side, Myriad’s pharmaceutical and clinical services revenues are expected to decline to a more normalized run rate in the fourth quarter. This is because management no longer anticipates gaining the benefits that Myriad received, during the third quarter, from the timing of some large contracts with pharmaceutical partners.

For the fiscal fourth quarter, the company expects adjusted earnings per share of 36–38 cents on total revenue of $186–$188 million. The Zacks Consensus Estimate for adjusted EPS of 38 cents coincides with the upper end of the company’s guided range, while that for revenues of $188.4 million exceeds the company’s guidance by a whisker.

Earnings Whispers

Our proven model does not conclusively show that Myriad Genetics is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Myriad has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 38 cents.

Zacks Rank: Myriad Genetics has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a 0.00 % ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider   

Here are some other companies you may want to consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:

Incyte Corporation (INCY Quick QuoteINCY - Free Report) , with an Earnings ESP of +300.00% and a Zacks Rank #2.

Ionis Pharmaceuticals, Inc. (IONS Quick QuoteIONS - Free Report) , with an Earnings ESP of +38.00% and a Zacks Rank #2.

Medtronic plc (MDT Quick QuoteMDT - Free Report) , with an Earnings ESP of +1.98% and a Zacks Rank #3.

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