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Can Myriad Genetics (MYGN) Spring a Surprise in Q4 Earnings?

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Myriad Genetics, Inc. (MYGN - Free Report) is scheduled to report fourth-quarter fiscal 2017 results on Aug 8, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 12.5%. Moreover, Myriad Genetics beat the Zacks Consensus Estimate in two of the trailing four quarters at an average of 1.01%.

Let’s take a look at how things are shaping up prior to this announcement.

Factors at Play

In the third quarter of fiscal 2017, Myriad Genetics witnessed a 5% sequential rise in Vectra DA test volumes. Management expects volumes to rise further in the fourth quarter on account of the popularity of the test. Moreover, management seemed to be upbeat about the Vectra DA test being identified by professional medical guidelines. We are therefore expect these factors to result in positive outcome in the upcoming quarter.

Meanwhile, management has been pursuing a number of initiatives related to different testing products which should get reflected in the company’s fourth-quarter revenue performance. The company launched the landmark EndoPredict test in the U.S. for patients with early-stage breast cancer in the third quarter. Moreover, Myriad Genetics presented favorable findings from its BRACAnalysis CDx test which successfully identified patients with metastatic breast cancer in Phase 3 OlympiAD Study in Jun 2017.

Myriad Genetics, Inc. Price and EPS Surprise

 

Management also seemed to be upbeat about its Prolaris test which grew 17% year over year and 9% sequentially in the third quarter. In May, the company announced the receipt of a positive final Local Coverage Determination (LCD) to expand Medicare coverage of the Prolaris test by Palmetto GBA, a Medicare Administrative Contractor (MAC).

Again, in May, the company announced plans of showcasing data demonstrating the utility of the Prolaristest to efficiently predict with precision the 10-year risk of metastases in men treated for prostate cancer at the American Urological Association (AUA) 2017 Annual Meeting.

Moving on to the newly acquired Assurex Health, management is on track to achieve the desired results by the end of fiscal 2017. Moreover, management seems to be pleased with the strong performance of its GeneSight test and expects this trend to continue. Thus, with innovative products like Vectra DA, Prolaris, myPath Melanoma, Myriad Genetics’ Companion Diagnostics, EndoPredict and myPlan Lung Cancer Test, the company is well poised to deliver encouraging results in the upcoming quarter.

Meanwhile, the company is plagued with several issues that may hamper its overall performance in the yet-to-be-reported quarter. Of late, the company has been delivering weak hereditary cancer revenues, primarily impacted by volume declines and price reduction. We note that the reduction in pricing was primarily led by the full implementation of long-term contracts signed by the company last year.

We are also concerned about unfavorable foreign currency translation. With a considerable portion of its revenues coming from outside the U.S, the company faces the risk of exchange rate fluctuations. Additionally, macroeconomic uncertainty and higher expenses owing to extensive pipeline of some testsmay impact the company’s margins in the fourth quarter as well.

Moving ahead, Myriad Genetics raised the revenue guidance for fiscal 2017 to the range of $745–$755 million from $745–$755 million. The Zacks Consensus Estimate of $764.89 million is well ahead of the range.

On the bottom-line front, the company slashed the high end and raised the low end of the adjusted EPS guidance to $1.01–$1.03 from $1.00–$1.05. The current Zacks Consensus Estimate of $1.02 lies within the present range. In this context, we believe the raised guidance indicates brighter prospects ahead.

For the fourth quarter of fiscal 2017, the company estimates adjusted earnings per share of 26–28 cents on total revenues of $192–$194 million. The Zacks Consensus Estimate for adjusted EPS is pegged at 26 cents and revenues at $193.54 million.

Earnings Whispers

Our proven model does not conclusively show that Myriad Genetics will beat estimates 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. However, that is not the case here, as you will see below.

Zacks ESP:  Myriad Genetics has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 24 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Myriad Genetics’ Zacks Rank #2 increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile, 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.

Stocks to Consider

Here are some companies you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:

Arena Pharmaceuticals, Inc. (ARNA - Free Report) has an Earnings ESP of +5.88% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.

Dextera Surgical Inc. (DXTR - Free Report) has an Earnings ESP of +9.09% and a Zacks Rank #2.

Teleflex Incorporated (TFX - Free Report) has an Earnings ESP of +0.52% and a Zacks Rank #2.

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