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Why Is Genomic Health (GHDX) Up 1.6% Since Its Last Earnings Report?

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It has been about a month since the last earnings report for Genomic Health, Inc. (GHDX - Free Report) . Shares have added about 1.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is GHDX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Genomic Health reported fourth-quarter 2017 adjusted earnings per share (EPS) of 8 cents, reflecting an improvement from the year-ago quarter’s 4 cents. Adjusted EPS however missed the Zacks Consensus Estimate of 9 cents.

Reported EPS came in at 5 cents, improving from the year-ago figure by a penny.

Full-year 2017 adjusted EPS came in at a penny, comparing favorably with the Zacks Consensus Estimate of a loss of 9 cents and the year-ago number of a loss of 42 cents.

Revenues in Detail

Total revenues in the quarter rose 5.8% year over year to $87.5 million, missing the Zacks Consensus Estimate of $89.1 million. Growth in the United States and international markets drove the top line. Moreover, during the quarter, Genomic Health witnessed solid U.S. invasive breast cancer growth.

Net revenues in 2017 totaled $340.8 million, missing the Zacks Consensus Estimate of $343.1 million. The figure however improved 3.9% from the year-ago number.

Geographically, fourth-quarter product revenues in the United States rose 5% to $73.5 million. The U.S. product revenue growth was fueled by a 38.9% rise in Prostate test revenues to $5 million and a 3.6% hike in invasive breast cancer revenues to $66.2 million. International product revenues totaled $13.7 million in the reported quarter, up 14.2%.

During the quarter, the company delivered more than 31,990 Oncotype DX test results, up 6.6% year over year.

Margin Trend

In the quarter under review, Genomic Health’s gross margin expanded 80 basis points (bps) year over year to 84.2%.

The company also witnessed a 5.6% rise in operating expenses to $71.4 million owing to a 0.61% rise in research and development expenses to $14.9 million, 11.1% uptick in general and administrative expenses to $20 million and 5.2% increase in selling and marketing expenses to $36.5 million.

In the reported quarter, Genomic Health reported an operating income of $2.2 million, showing a year-over-year improvement from $1.5 million a year ago. Accordingly, the operating margin expanded 70 bps to 2.5%.

Financial Update

Genomic Health exited 2017 with cash and cash equivalents and short-term marketable securities (including a corporate equity investment) of $129.6 million, reflecting an improvement from $97 million recorded at the end of 2016.

2018 Guidance

The company issued guidance for 2018. Genomic Health expects full-year 2018 revenues in the range of $366-$382 million, reflecting growth of 10-15%. The Zacks Consensus Estimate of $384.1 million is above the guided range.

The company expects adjusted basic EPS in the band of 39-56 cents. The Zacks Consensus Estimate is pegged at 34 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

Genomic Health, Inc. Price and Consensus

 

Genomic Health, Inc. Price and Consensus | Genomic Health, Inc. Quote

VGM Scores

At this time, GHDX has a strong Growth Score of A and a grade with the same score on the momentum front. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for growth and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, GHDX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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