Following its disappointing first quarter fiscal 2013 results,
we are downgrading our recommendation on
) to 'Underperform' with a price target of $6.
The company's adjusted loss per share of 23 cents was wider
than the Zacks Consensus Estimate of a loss of 20 cents in the
reported quarter. Moreover, adjusted revenues of $83 million
(down 13.3% year-over-year), also trailed the Zacks Consensus
Estimate of $87 million.
Further, we remain concerned about the declining Cyberknife
sales. Net orders for the CyberKnife products dropped 12% in the
quarter. Accuray is totally dependent on the CyberKnife and
TomoTherapy systems sales for its long-term profitability. Hence,
any disruptions to the sales of these products will lead to a
loss of customers, which will be unfavorable to top-line growth.
Moreover, margin contraction is also a major cause of concern
for the company. Adjusted gross margin for the quarter was 33.3%
versus 36.4% in the year-ago quarter, due to change in sales mix.
Additionally, adjusted operating loss was $17.7 million compared
with a loss of $9.9 million, a year ago.
Accuray remains susceptible to the weak U.S. and European
markets and reimbursement uncertainties. It also faces stiff
challenges from competitive product offerings of
Varian Medical Systems Inc.
Integra LifeSciences Holdings Corporation
Despite these shortcomings, we must take into account that
Accuray is a renowned supplier of radiosurgery offerings and
provides non-surgical treatment option for patients diagnosed
with cancer. Globally, more than 200,000 people have been treated
with the company's technology.
We are upbeat about the compelling prospect in radiation
oncology rendered by the TomoTherapy acquisition. New
products are expected to drive long-term growth for the company.
In addition, Acurray is focusing on investing in emerging markets
to expand its business.
The stock carries a short-term Zacks #3 Rank (Hold
ACCURAY INC (ARAY): Free Stock Analysis
INTEGRA LIFESCI (IART): Free Stock Analysis
VARIAN MEDICAL (VAR): Free Stock Analysis
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