On Mar 20, we upgraded our recommendation on
) to Neutral from Underperform. Despite posting wider losses in
the second quarter of fiscal 2013, the company managed to beat
both earnings and revenue estimates.
Why the Upgrade?
Accuray's second-quarter fiscal 2013 adjusted loss of 30 cents
per share was narrower than the Zacks Consensus Estimate of a
loss of 34 cents. Adjusted revenues of $77.7 million beat the
Zacks Consensus Estimate by $3.7 million, despite a 24.5% decline
from the prior year. The results surpassed the guidance provided
by the company in January on the back of solid service
Following the release of the quarterly results, the Zacks
Consensus Estimate for loss per share for both fiscal 2013 and
2014 remained unchanged at 90 cents and 27 cents, respectively.
With the Zacks Consensus Estimates for both fiscal years showing
no clear directional pressure on the stock in the near term, the
company now has a Zacks Rank #3 (Hold).
Despite a decline in product revenues at an alarming rate,
solid revenues from services are keeping the company afloat.
Additionally, we are upbeat about the compelling prospect in
radiation oncology rendered by TomoTherapy. New products and
service margin expansion are expected to be tailwinds for the
However, management cited certain internal issues that delayed
the launch of the company's latest technologies and widened its
losses. In an effort to remediate the shortfall, Accuray
announced a major restructuring program and issued convertible
notes to strengthen its balance sheet, which appears to be
Other Stocks to Consider
Medical instrument companies such as
) are worth considering. While Cyberonics and Given Imaging carry
a Zacks Rank #1 (Strong Buy), Abiomed carries a Zacks Rank #2
ABIOMED INC (ABMD): Free Stock Analysis
ACCURAY INC (ARAY): Free Stock Analysis
CYBERONICS INC (CYBX): Free Stock Analysis
GIVEN IMAGING (GIVN): Free Stock Analysis
To read this article on Zacks.com click here.