A month has gone by since the last earnings report for Genomic Health (GHDX - Free Report) . Shares have lost about 18% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Genomic Health 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.
Genomic Health Rides on Solid US Invasive Breast Cancer Growth in Q3
Genomic Healthreported third-quarter 2018 adjusted earnings per share (EPS) of 35 cents compared with the year-ago adjusted EPS of 3 cents. The bottom line also surpassed the Zacks Consensus Estimate of 7 cents.
Reported net income came in at 32 cents per share against the year-ago net loss of 6 cents.
Revenues in Detail
Total revenues in the quarter rose 20.9% year over year to $101.3 million, beating the Zacks Consensus Estimate by 7.2%. Growth in the United States and international markets drove the top line. Solid U.S. invasive breast cancer growth was also recorded in the quarter.
Geographically, third-quarter product revenues in the United States rose 23% to $85.8 million from the year-ago pre-606 adjusted revenues. The U.S. product revenue growth was fueled by a 24% rise in U.S. invasive breast revenues from Oncotype DX Breast Recurrence Score tests and a 28% surge in U.S. prostate test revenues from Oncotype DX Genomic Prostate Score (GPS) tests.
International product revenues totaled $15.5 million in the quarter under review, up 22% year over year (up 20% at adjusted constant currency) from the year-ago pre-606 adjusted tally.
During the third quarter, the company delivered more than 34,810 Oncotype DX test results, up 10% year over year.
Genomic Health’s gross margin expanded 70 basis points (bps) year over year to 84.7% in the third quarter.
The company also saw a 1.2% rise in operating expenses to $74 million on a 4.7% rise in selling and marketing expenses to $40.1 million and a 5.7% increase in general and administrative expenses to $18 .5 million. However, research and development expenses declined 10.5% to $15.4 million.
In the reported quarter, Genomic Health’s operating income came in at $11.8 million against the year-ago operating loss of $2.6 million.
Genomic Health exited the third quarter of 2018 with cash and cash equivalents and short-term marketable securities of $183.2 million, highlighting an improvement from $152.9 million at the end of second-quarter 2018.
2018 Guidance Updated
Genomic Health now expects full-year revenues in the range of $389-$391 million as against the prior $366-$382 million, reflecting growth of 17% (from 10-15% growth stated earlier). The Zacks Consensus Estimate is pegged at $392.3 million, above the guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 280.49% due to these changes.
At this time, Genomic Health has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Genomic Health has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.