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Accuray (ARAY) Down 13.7% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Accuray Incorporated (ARAY - Free Report) . Shares have lost about 13.7% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is ARAY due for a breakout? 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

Accuray reported a loss of 10 cents per share in the third quarter of fiscal 2018, 7 cents wider than the Zacks Consensus Estimate and 4 cents wider than the year-ago figure.

Total revenues in the quarter increased 2.6% year over year to $99.8 million, beating the Zacks Consensus Estimate of $98.2 million.

Segment Details

Product Revenues:Product revenues declined 10% to $43.2 million. The same from Japan declined roughly $10 million in the third quarter. Despite the year-over-year decline in total product revenues, the company continued to witness strength in Radixact.

Service Revenues:Service revenues amounted to $56.6 billion in the reported quarter, up 14.8% year over year, courtesy of increased upgrade purchase on service contract.

Gross Order Update:Gross Order performance in the third quarter of fiscal 2018 was $74.9 million, down 10.6% from the last quarter. Order growth was primarily driven by TomoTherapy array of products and Radixact system orders.

Margin Details

In the quarter under review, total gross margin was 36.3%, roughly flat year over year. Product gross margin increased 41.4% in the reported quarter, compared with 38.4% in the year-ago quarter. This can be attributed to increased revenue contribution from CyberKnife Systems and Radixact Systems.

Service gross margin in the third quarter was 32.4%, compared with 34.4% in the year-ago quarter.

Operating expenses totaled $40.1 million versus $36.7 million in the year-ago quarter. The increase was primarily led by investments in research and development and sales and marketing.

Financial Condition

Accuray exited the third quarter with $70.4 million of cash and cash equivalents, compared with $79.5 million in the second quarter of fiscal 2018.

Guidance for 2018

The company revised its previous guidance.

The company expects revenues between $395 million and $400 million from the previous range of $390 million to $400 million. The Zacks Consensus Estimate for fiscal 2018 revenues of $399.72 million is near the high end of the guided range.

The guidance for gross order growth has been maintained to rise at approximately 5% on a year-over-year basis.

The company expects adjusted EBITDA between $18 million and $20 million from the previously provided range of $25 million and $30 million.

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. In the past month, the consensus estimate has shifted downward by 166.7% due to these changes.

Accuray Incorporated Price and Consensus

VGM Scores

At this time, ARAY has a subpar Growth Score of D, however its Momentum is doing a lot better with an A. However, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for momentum based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise ARAY has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.




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