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Why Is Accuray (ARAY) Down 6.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Accuray (ARAY - Free Report) . Shares have lost about 6.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Accuray 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 catalysts.

Accuray Q1 Loss Wider Than Expected, Guidance Retained

Accuray reported first-quarter fiscal 2019 adjusted loss of 7 cents per share, wider than the Zacks Consensus Estimate of a loss of 6 cents. Notably, the company had reported a loss of 7 cents in the year-ago quarter.

The company posted net revenues worth $95.83 million, marginally beating the Zacks Consensus Estimate of $95 million. On a year-over-year basis, revenues climbed 5.4% in the quarter.

Q1 Details

Product Revenues: Product revenues increased 6.7% year over year to $41.5 million in the reported quarter.

Service Revenues: Service revenues totaled $54.3 million, which rose 4.4% from the year-ago quarter’s tally. The upside can be attributed to Accuray's recent software releases.

Gross Order Update: Gross orders in the first quarter of fiscal 2019 totaled $61.4 million, up 10.4% on a year-over-year basis.

Radixact Update

Per management, gross orders for Accuray’s flagship Radixact System more than doubled on a year-over-year basis in the fiscal first quarter. Accuray registered approximately 25 system orders.

Radixact represented approximately 85% of TomoTherapy platform orders.

Margins

Gross profit in the fiscal first quarter totaled $37.9 million, down 0.6% on a year-over-year basis. Gross margin in the quarter was 39.5% of net revenues, down 240 basis points (bps).

Research and development expenses contracted 1.4% year over year to $13.9 million. Selling and marketing expenses fell 11.7% year over year to $13 million. General and administrative expenses rose 38.3% year over year to $15.6 million.

First-quarter operating loss was $4.7 million compared with a loss of $2.1 million in the year-ago quarter.

Guidance

Accuray reiterated fiscal 2019 revenue guidance and updated EBITDA guidance.

For fiscal 2019, product revenue growth is expected between 4% and 8% and service revenue growth is projected at 2%, with total revenues estimated at $415-$425 million.

Adjusted EBITDA is projected between $23 million and $29 million, higher than the previous range of $21 million to $27 million. This represents growth of 35-70% year over year, significantly higher than the previously estimated growth rate of 23-58%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -71.43% due to these changes.

VGM Scores

Currently, Accuray has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Accuray has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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