It has been about a month since the last earnings report for Myriad Genetics (MYGN - Free Report) . Shares have lost about 3.8% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Myriad due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Myriad Genetics Rides on Strong Molecular Diagnostics in Q1
Myriad Genetics reported adjusted earnings per share (EPS) of 43 cents in the first quarter of fiscal 2019, up 48.3% year over year. Moreover, adjusted EPS beat the Zacks Consensus Estimate of 30 cents by 43.3% and exceeded the company’s guided range of 28-30 cents.
Meanwhile, on a reported basis, the company incurred loss per share of a penny as against earnings of $1.12 a year ago.
Total revenues were up 13.1% year over year to $202.3 million in the quarter under review and were almost in line with the high end of the company’s guidance of $200-$202 million. The figure, however, missed the Zacks Consensus Estimate by 0.8%.
The year-over-year growth was driven by growing new product and hereditary cancer volumes, offsetting adverse impacts from price reductions in long-term contracts related to Hereditary cancer testing. Moreover, this was the seventh consecutive quarter in which the company witnessed year-over-year Hereditary cancer testing volume growth.
Quarter in Detail
Segment-wise, Molecular diagnostic tests (93.4% of total revenues) recorded total revenues of $189 million, up 12.9% year over year. Hereditary Cancer testing revenues declined by 0.6% to $116.3 million. Furthermore, Hereditary Cancer testing revenues declined due to price reductions in long-term contracts.
EndoPredict testing revenues rose 33.3% year over year to $2.4 million in the reported quarter. Vectra DA testing revenues were $13 million, down 7.1% year over year while other testing revenues rose 94.7% to $3.7 million. Further, GeneSight testing revenues rose 1.7% year over year to $29.3 million in the reported quarter. Prolaris tests raked in revenues of $6.2 million, up 59% year over year. Prenatal testing revenues came in at $18.1 million.
Pharmaceutical and clinical service revenues (accounting for the rest) in the quarter under review totaled $13.3 million, reflecting a year-over-year increase of 16.7%.
Gross margin in the quarter under review contracted 60 basis points (bps) to 75.4%. However, adjusted gross margin came in at 77.1%, up 100 bps year over year. According to management, the gross margin performance was led by reduction in reagent costs derived by initiating new process enhancement for the DNA, RNA, and protein laboratories.
Adjusted operating income was $1.6 million, down 85.2% year over year. Research and development (R&D) expenses rose 18.5% year over year (to $21.1 million) along with a 21.2% increase in selling, general and administrative (SG&A) expenses (to $129.9 million) in the reported quarter. The adjusted operating margin came in at 0.8%, compared with operating margin of 6% a year ago.
Myriad Genetics exited first-quarter fiscal 2019 with cash, cash equivalents and marketable securities of $167.5 million compared with $180.6 million at the end of fiscal 2018. For the three months ending Sep 30, 2018, cash flow from operations totaled $7.8 million compared with $23.5 million a year ago. Further, the company registered free cash flow of $6.5 million in the same period, compared with $21.9 million a year ago.
Myriad Genetics has updated the guidance for the fiscal 2019 revenues. The company now expects fiscal 2019 revenues in the range of $855-$865 million compared with $880-$890 million stated previously. The Zacks Consensus Estimate of $901.9 million lies above the guided range.
On the bottom-line front, the company continues to expect adjusted EPS of $1.70-$1.75. The current Zacks Consensus Estimate of $1.73 is within the company’s guided range.
Management has provided the guidance for the second quarter of fiscal 2019. The company estimates adjusted EPS of 36-38 cents on total revenues of $216-$218 million. The Zacks Consensus Estimate for adjusted EPS is 43 cents and revenues is $226.2 million. Our estimates for both the metrics are above the company’s guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Myriad has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Myriad has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.