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Accuray (ARAY) Q2 Earnings Top Estimates, Gross Orders Fall

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Accuray Incorporated ARAY reported second-quarter fiscal 2020 adjusted earnings per share (EPS) of a penny, comparing favorably with the Zacks Consensus Estimate of a loss of 7 cents. The company had reported a loss of 5 cents a year ago.
 
Net revenues of this Zacks Rank #3 (Hold) company totaled $98.8 million, edging past the Zacks Consensus Estimate of $98.5 million. On a year-over-year basis, revenues dropped 3.4%.
 
Fiscal Q2 Details
 
Product Revenues: Product revenues fell 8.9% year over year to $43.8 million in the reported quarter.
 
Service Revenues: Service revenues totaled $55.1 million, up 1.5% from the year-ago quarter.

Accuray Incorporated Price, Consensus and EPS Surprise

 

Accuray Incorporated Price, Consensus and EPS Surprise

Accuray Incorporated price-consensus-eps-surprise-chart | Accuray Incorporated Quote

Gross Order Update: Gross orders in the fiscal second quarter totaled $98.6 million, down 1.6% year over year. However, per management, gross orders in the quarter were above the projected range of $87-$90 million, driven by CyberKnife and Radixact platforms.
 
Margins
 
Gross profit in the fiscal second quarter totaled $37.9 million, down 1.3% on a year-over-year basis. Gross margin was 38.4%, highlighting an expansion of 90 basis points (bps) year over year.
 
Research and development expenses contracted 4.2% year over year to $13.1 million. Selling and marketing expenses declined 25.2% to $11.3 million. General and administrative expenses contracted 5.6% to $9.9 million.
 
Second-quarter operating income was $3.6 million against a loss of $868,000 in the year-ago quarter.
 
Cash Position
 
The company exited second-quarter fiscal 2020 with total cash, cash equivalents, and short-term restricted cash of $99.1 million, compared with $86.7 million at the end of Sep 30, 2019.
 
Guidance
 
Accuray continues to expect revenues within $410-$420 million for fiscal 2020. The Zacks Consensus Estimate for the same is pegged at $414.5 million.
 
Management expects higher revenue growth in the second half of fiscal 2020, compared to the first half.
 
Adjusted EBITDA for fiscal 2020 is expected within $21-$26 million.
 
Our Take
 
Accuray exited the fiscal second quarter on a strong note. Solid demand for the Radixact, CyberKnife and TomoTherapy platforms drove the top line. We are also upbeat to note that the company’s gross orders were driven by continued strength in China and EMEA. Accuray retained its fiscal 2020 revenue guidance. Expansion of gross margin is encouraging as well.
 
On the flip side, the year-over-year decline in the top line is concerning. In fact, Accuray’s Product revenues were soft in the quarter. Accuray also expects a year-over-year revenue decline in the first half of fiscal 2020.
 
Key Picks
 
Some better-ranked stocks in the broader medical space are Cerner Corporation (CERN - Free Report) , DexCom DXCM and HealthEquity HQY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 
The Zacks Consensus Estimate for Cerner’s fourth-quarter revenues is pegged at $1.43 billion, suggesting a year-over-year increase of 5%. The same for EPS stands at 74 cents, indicating a year-over-year upside of 17.5%.
 
The Zacks Consensus Estimate for DexCom’s fourth-quarter revenues is pinned at $457 million, calling for a year-over-year increase of 35.2%. The same for EPS stands at 72 cents, hinting at year-over-year growth of 33.3%.
 
The Zacks Consensus Estimate for HealthEquity’s fiscal fourth-quarter revenues is pegged at $193.6 million, calling for a year-over-year increase of 155.5%. The same for EPS stands at 19 cents.
 
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