On July 3, we have updated our research report on
). Despite being a loss-making company, we expect the company's
product revenues to improve further as medical centers continue to
adopt the company's innovative radiosurgery and radiation therapy
systems on a global basis.
We are also encouraged about Accuray's narrower loss in the
2014-third quarter and upgraded guidance for total revenue for the
full fiscal year.
Accuray posted 2014-third quarter loss of 6 cents, that was
significantly narrower than the Zacks Consensus Estimate by 10
cents as well as the year-ago level by 36 cents. Revenues of $97.1
million also beat our benchmark by $15.1 million.
Product revenues surged 88.0% to $47.0 million, mainly driven by
enhanced commercial effort and improvement in the company's order
to revenue conversion process. Product backlog at the end of the
reported quarter was $354 million, approximately 19% higher than
the backlog at the end of the prior-year quarter.
Service revenues stood at $50.0 million, up 10.0% from the year-ago
quarter. The upside was driven by the increase in the company's
installed base and shift of customers.
Product and services gross margins were 46.3% and 35.8%,
respectively, in the third quarter versus 26.5% and 29.5% in the
Product gross margin improved on higher volume and stronger average
product revenues. The significantly higher service gross margin
represents continued improvement in TomoTherapy Systems
reliability, which continues to drive demand for lower as well as
higher-margin service contracts.
For fiscal 2014, Accuray raised its total revenue guidance to a
range of $355 to $365 million from the previous range of $340 to
$350 million provided on Jan 30, 2014. The current Zacks Consensus
Estimate of $354 million lies below the revised guided range.
However, Accuray is exposed to significant competition in the
radiation oncology market, which is characterized by rapid
technological changes. It also faces reimbursement uncertainties
for its products.
Currently, Accuray retains a Zacks Rank #3 (Hold). Some
better-ranked stocks in the medtech industry are
Navidea Biopharmaceuticals, Inc
Symmetry Medical, Inc.
). All of them retain a Zacks Rank #2 (Buy).
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