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What's in the Cards for Genomic Health (GHDX) in Q4 Earnings?

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Genomic Health, Inc. (GHDX - Free Report) is scheduled to report fourth-quarter and 2017 results on Mar 8, before the market opens.

Last quarter, the company posted a positive earnings surprise of 400%. Moreover, Genomic Health beat the Zacks Consensus Estimate in two of the trailing four quarters, the average being 116.7%.

The fourth-quarter results are expected to show steady growth in Product revenues. Let’s take a look at how things are shaping up prior to this announcement.

Genomic Health, Inc. Price and EPS Surprise


Genomic Health, Inc. Price and EPS Surprise | Genomic Health, Inc. Quote


Product Revenues in Focus

Genomic Health’s product-revenue unit continues to make significant progress with its Oncotype DX breast cancer test. Positive results related to Oncotype DX Genomic Prostate Score are also likely to yield solid results in the fourth quarter.

In the third quarter, total product revenues grew 2.1% year over year. Product revenues grew domestically as well as internationally. The Zacks Consensus Estimate for product revenues is pegged at $89 million for the fourth quarter, reflecting 6% growth from the third quarter and 8.5% year over year.

Notably, for the fourth quarter, Genomic Health again expects double-digit test growth at the international business. According to the company, as of Sep 30, 2017, majority of the product revenues has been derived from the sale of one product — the Oncotype DX breast cancer test.

So far, Genomic Health has been witnessing healthy progress with regard to establishing coverage for its Oncotype DX breast cancer test. Also, Genomic Health and Biocartis Group NV had signed an agreement in last September to develop an in vitro diagnostic (IVD) version of the Oncotype DX Breast Recurrence Scoretest on Biocartis' proprietary Idylla platform. The company’s continuous focus to strengthen its position in the niche is likely to boost the top line.

Other Factors at Play

Solid Estimates

The Zacks Consensus Estimate for fourth-quarter 2017 adjusted earnings of 9 cents reflects a 200% rise from the previous quarter and 125% from the year-ago quarter.

The Zacks Consensus Estimate for revenue is pegged at $89 million, showing an increase of 6% from the preceding quarter and 7.2% from the year-ago quarter.

Guidance Strong

The company has reiterated the guidance for 2017. Genomic Health expects to meet the low end of its full-year revenue guidance of $345-$355 million. The Zacks Consensus Estimate of $343.1 million is below the guided range.

Prostate-Cancer Business Drives Growth

Genomic Health’s U.S. prostate cancer business has been consistently improving over the last few quarters. The company has continued to make progress, delivering actionable results to increase adoption of this test and gather evidence to support private reimbursement. In the third quarter, revenues in this business more than doubled on a year-over-year basis with U.S. product revenues being driven by a 139% rise in Prostate test revenues.

Recently, Genomic Health announced a multi-year research collaboration agreement with Janssen Pharmaceuticals. Through this, the companies will evaluate the responsiveness of Genomic Health’s Oncotype DX Genomic Prostate Score test to Janssen’s prostate cancer drug pipeline.

Forex Woes

With a considerable portion of its revenues coming from outside the United States, the company faces the risk of exchange rate fluctuations.

Earnings Whispers

Our proven model does not conclusively show that Genomic Health 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: Genomic Health has an Earnings ESP of 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 9 cents.

Zacks Rank: Genomic Health carries a Zacks Rank #3, which increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.

Stocks to Consider

Here are a few medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Universal Health Services (UHS - Free Report) has an Earnings ESP of +1.96% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

NuVasive, Inc. (NUVA - Free Report) has an Earnings ESP of +0.51% and a Zacks Rank #3.

Integra LifeSciences Holdings Corporation (IART - Free Report) has an Earnings ESP of +2.66% and a Zacks Rank #3.

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