It has been about a month since the last earnings report for Myriad Genetics (MYGN). Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Myriad due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Myriad Genetics Rides on Strong Molecular Diagnostics in Q4
Myriad Genetics reported adjusted earnings per share (EPS) of 38 cents in the fourth quarter of fiscal 2018, up 26.7% year over year, without considering adjustments for transitioning from Accounting Standards Codification(ASC)-605 to ASC-606. Further, after considering the required alterations, the adjusted EPS of 38 cents rose 31% year over year.
Moreover, adjusted EPS beat the Zacks Consensus Estimate of 33 cents and exceeded the company's guided range of 31-33 cents.
Reported earnings were 18 cents, flat year over year.
Full-year adjusted EPS was $1.20, improving from the year-ago figure of $1.03, after considering the adjustments related to the adoption of ASC-606. However, the figure missed the Zacks Consensus Estimate by a penny.
Total revenues were up 0.2% year over year to $200.9 million in the quarter under review, without considering the adjustments related to the adoption of ASC-606. However, after considering the required adjustments, revenues rose 0.7% year over year. The figure also outpaced the Zacks Consensus Estimate by 2.6% and was above the company's guidance of $193-$195 million.
Year-over-year growth was caused by growing new product and hereditary cancer volumes, offsetting adverse impacts from price reductions in long-term contracts related to Hereditary cancer testing. Moreover, this was the sixth consecutive quarter in which the company witnessed year-over-year Hereditary cancer volume growth.
Fiscal 2018 revenues of $772.6 million were up 0.4% from the year-ago figure. It, however, missed the Zacks Consensus Estimate of $773.7 million.
Quarter in Detail
Myriad Genetics has adopted ASC-606 from the fourth quarter of fiscal 2018 and the following figures have been duly adjusted for the aforesaid change.
Segment-wise, Molecular diagnostic tests (93.4% of total revenues) recorded total revenues of $187.6 million, up 0.3% year over year on account of an 11.6% decline in Hereditary cancer testing revenues to $126.8 million. Furthermore, Hereditary Cancer testing revenues declined due to price reductions in long-term contracts. However, volume growth exceeded the company's 3% growth target on a year-over-year basis.
EndoPredict testing revenues rose by 40% year over year to $2.8 million in the reported quarter. Vectra DA testing revenues were $15.1 million, up 46.6% year over year while other testing revenues declined 25.9% to $2 million. Further, GeneSight testing revenues rose 32.9% year over year to $33.9 million in the reported quarter. Prolaris tests raked in revenues of $7 million, up 133.3% year over year.
Pharmaceutical and clinical service revenues (accounting for the rest) in the quarter under review totaled $13.3 million, reflecting a year-over-year increase of 5.6%.
Gross margin in the quarter under review contracted 140 basis points (bps) to 77.3%. However, adjusted gross margin came in at 79%, remaining flat year over year. According to management, the gross margin performance was led by increasing new product reimbursement and the partial implementation of new process enhancement for the DNA, RNA, and protein laboratories.
Adjusted operating income was $16.1 million, down 0.6% year over year. However, the research and development (R&D) expenses declined 5.9% year over year (to $17.7 million) along with a 0.6% fall in selling, general and administrative (SG&A) expenses (to $121.4 million) in the reported quarter. The adjusted operating margin came in at 8.1%, remaining flat year over year.
Myriad Genetics exited the fiscal with cash, cash equivalents and marketable securities of $180.6 million compared with $150.7 million at the end of the preceding fiscal. For the 12 months, ending Jun 30, 2018, cash flow from operations totaled $115.9 million compared with $106.2 million a year ago. Further, the company registered free cash flow of $107.5 million for the 12 months, ending Jun 30, 2018, compared with $100.1 million in the year-ago period.
Myriad Genetics has issued the guidance for the first quarter and fiscal 2019 revenues and earnings. In this regard, the company expects to record revenues of $880-$890 million in fiscal 2019. The Zacks Consensus Estimate of $798.7 million lies below the guided range.
On the bottom-line front, the company expects adjusted EPS of $1.70-$1.75. The current Zacks Consensus Estimate of $1.41 is below the company's guided range.
Management has provided the guidance for the first quarter of fiscal 2019. The company estimates adjusted EPS of 28-30 cents on total revenues of $200-$202 million. The Zacks Consensus Estimate for adjusted EPS is 31 cents and revenues is $191.6 million. While the consensus estimate for earnings is above the company's guided range, our revenue estimates lie below the projected 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 -18.28% due to these changes.
Currently, Myriad has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Myriad has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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