Back to top

Image: Bigstock

Veracyte (VCYT) Up 6% Since Last Earnings: Will it Continue?

Read MoreHide Full Article

Veracyte‘s (VCYT - Free Report) shares have increased 6% since the last earnings report compared with the industry’s rise of 4.2%. The Medical sector has gained 5% in the said time frame. The company has a market capitalization of $1.71 billion.

The continued strong growth momentum with a robust display of strength in the testing business using an established diagnostic platform is likely to drive this Zacks Rank 1 (Strong Buy) stock.

Its earnings are expected to grow 11.9% in 2024. Its earnings surpassed estimates in all four trailing quarters, average surprise being 59.65%.

Will the Upside Continue?

Veracyte’s comprehensive Afirma solution, consisting of the Afirma GSC (Genomic Sequencing Classifier) and the Afirma Xpression Atlas, efficiently addresses the complex landscape in thyroid nodule diagnosis. About 14,000 Afirma test results were reported by the company in first-quarter 2024, along with a 14% uptick in revenues that aligned with its expectations. Veracyte is gaining market share for the test as more people become aware of the compelling evidence supporting its quality and performance. In addition, Afirma can potentially offer vital information to nearly 15,000 patients with a Bethesda V cytology diagnosis, who are now included in the system’s broadened recommendations for molecular testing.

For 2024, Veracyte’s growth strategy for Afirma includes making continued efforts to drive penetration into both existing and new physician accounts. The company started seeing a favorable dynamic for the test in rural areas. It is also working with MolDX on a draft LCD to cover thyroid nodules that will testify cytology, expanding access to patients who could benefit from it.

Veracyte’s successful approach involves identifying medical needs, developing tests and securing clinical evidence, reimbursement and guideline inclusion to drive market penetration. The strategy enables them to invest in long-term growth drivers, such as tackling new cancer challenges with the Percepta Nasal Swab test. This non-invasive test is built on the company’s foundational ‘field of injury’ technology, which evaluates genomic changes associated with lung cancer in current and former smokers. The company significantly invests in clinical validation studies to secure reimbursement from payers for the test before it is made widely available.

Zacks Investment ResearchImage Source: Zacks Investment Research

The company bolstered its growth driver of serving patients further along the care continuum with the acquisition of C2i Genomics in February 2024. The latter’s novel whole-genome sequencing approach to MRD fits well into Veracyte’s diagnostics platform, enabling them to expand the test offering throughout the patient journey. The first application of C2i’s technology, a muscle-invasive bladder cancer MRD test, is currently in the early stages of development, which the company intends to launch in the first half of 2026.

A strong solvency position raises optimism. Veracyte exited the first quarter with cash and cash equivalents of $209.2 million and no current debt, reflecting strong solvency.  The company’s ability to cover near-term obligations is supported by a strong current ratio of 5.00, which sequentially rose from fourth-quarter 2023 tally of 4.66. Consistent with the past quarters, it did not report any long-term debt at the end of the quarter under review.  

The upbeat financial outlook for 2024 looks encouraging. Revenues for 2024 are expected between $402 million and $410 million (earlier $394 million and $402 million). The Zacks Consensus Estimate is presently pegged at $399.1 million.

Estimate Trends

The Zacks Consensus Estimate for VCYT’s 2025 has moved up from 1 cent to 7 cents, reflecting analysts’ optimism.

Key Picks

Some other top-ranked stocks from the broader medical space are Medpace (MEDP - Free Report) , ResMed (RMD - Free Report) and Encompass Health Corporation (EHC - Free Report) .

Medpace, sporting a Zacks Rank #1, reported first-quarter 2024 earnings per share (EPS) of $3.20, beating the Zacks Consensus Estimate by 30.6%. Revenues of $511 million increased 17.7% from last year’s comparable figure. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medpace has an estimated 2024 earnings growth rate of 26.5% compared with the industry’s 12.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 12.8%.

ResMed, carrying a Zacks Rank #2 (Buy), reported first-quarter 2024 EPS of $2.13, which topped the Zacks Consensus Estimate by 10.9%. Revenues of $1.20 billion surpassed the Zacks Consensus Estimate by 1.9%.

RMD has an estimated fiscal 2024 earnings growth rate of 17.9% compared with the industry’s 15.7%. In each of the trailing four quarters, the company delivered an average earnings surprise of 2.8%.

Encompass Health, carrying a Zacks Rank #2, reported first-quarter 2024 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 20.4%. Net operating revenues of $1.3 billion topped the Zacks Consensus Estimate by 3.6%.

EHC has an estimated long-term earnings growth rate of 15.6% compared with the industry’s 11.7% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 18.7%.

Published in