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Myriad Genetics (MYGN) Beats on Q2 Earnings, Narrows View

Myriad Genetics Inc. (MYGN) reported adjusted earnings per share (EPS) of 26 cents in the second quarter of fiscal 2017, down 42.2% year over year. However, adjusted EPS beat the Zacks Consensus Estimate by 8.3% and surpassed the company's guided range of 23-25 cents.

Including one-time items, the company reported net income of $5.9 million or earnings of 26 cents per share in the reported quarter, exhibiting a decline of 84% and 82%, respectively.

Revenues

Total revenue rose 3.3% year over year to $196.5 million. The figure also outpaced the company's guidance of $188-$190 million. The top line also exceeded the Zacks Consensus Estimate of $191 million.

The year-over-year rise in the top line was primarily on account of sequential growth in hereditary cancer revenues and strong results from GeneSight.

Segment-wise, Molecular diagnostic tests (93.5% of total revenue) recorded total revenue of $183.9 million, up 1% year over year, mainly on account of EndoPredict testing revenues which surged 78% to $1.6 million. Prolaris testing revenues also rose 63% to $3.1 million. However, Hereditary cancer testing revenues dropped 13% year over year to $143.9 million, Vectra DA testing revenues fell 5% to $10.7 million and other testing revenues remained flat at $2.9 million.

On the other hand, Pharmaceutical and clinical service revenues (accounting for the rest) in the second quarter of 2017 grossed $12.6 million, reflecting year-over-year growth of 18%.

Margin Trends

Gross margin in the quarter under review contracted 160 basis points (bps) to 77.4%. According to management, this decline was due to unfavorable product mix with more revenues coming in from lower margin segments such as pharmaceutical and clinical services along with reduced fixed cost absorption on lower hereditary cancer revenues. Additionally, the company witnessed an impact from the full implementation of long-term contracts in hereditary cancer.

Operating expenses rose 29.2% to $139 million owing to a 32.5% rise in selling, general and administrative (SG&A) expenses to $120 million. Research and development (R&D) expenses rose 11.4% (to $19 million) in the reported quarter. Consequently, the operating margin contracted a stupendous 1348 bps, down 48.1%.

Financial Position

Myriad exited the second quarter of fiscal 2017 with cash, cash equivalents and marketable securities of $162.5 million, higher than $148.4 million at the end of first-quarter 2017. Year to date, cash used in operations totaled $28.5 million, down 65.2% year over year. Consequently, free cash flow was down to $29.0 million from $39.8 million a year ago. The company repurchased 6.0 million shares for $10 million during the second quarter of 2017.

Guidance

Myriad narrowed its earlier guidance for fiscal 2017. The company currently expects revenues in the range of $745-$755 million, compared to the earlier expectation of $740-$760 million. The Zacks Consensus Estimate of $760.2 million is above the range.

On the bottom-line front, the company expects to generate adjusted EPS in the band of $1.00-$1.05, reducing the higher end by 5 cents from the previous one ($1.00-$1.10). The current Zacks Consensus Estimate of 99 cents lies below Myriad's guidance.

Alongside, management has provided its outlook for the third quarter of fiscal 2017. The company estimates adjusted earnings per share at 23-25 cents on total revenues of $188-$190 million. The Zacks Consensus Estimate for adjusted EPS is pegged at 26 cents and revenues at $192 million, which exceeds the company's guided range.

Our View

Myriad recorded impressive second-quarter fiscal 2017 results with both earnings and revenues beating the Zacks Consensus Estimate. The company particularly observed strong growth in both Prolaris and Vectra DA testing revenues. Revenues in the second quarter reached the highest level in the last three years, buoyed by a return to sequential growth in hereditary cancer revenues and strong results from GeneSight.

On the flip side, a weak gross margin scenario is dampening. Also, the company's narrowed guidance for fiscal 2017 is also discouraging.

Zacks Rank & Key Picks

Myriad currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are Glaukos Corporation (GKOS), Cardiovascular Systems (CSII) and Neogen Corp. (NEOG). Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Glaukos gained over 100% in the last one year in comparison to the S&P 500's gain of only 23.8%. The company has a stellar four-quarter average earnings surprise of over 100%.

Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.

Neogen gained 32.7% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared to the industry average of 15.2%.

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Myriad Genetics Inc.MYGN reported adjusted earnings per share (EPS) of 26 cents in the second quarter of fiscal 2017, down 42.2% year over year. However, adjusted EPS beat the Zacks Consensus Estimate by 8.3% and surpassed the company's guided range of 23-25 cents.

Including one-time items, the company reported net income of $5.9 million or earnings of 26 cents per share in the reported quarter, exhibiting a decline of 84% and 82%, respectively.

Revenues

Total revenue rose 3.3% year over year to $196.5 million. The figure also outpaced the company's guidance of $188-$190 million. The top line also exceeded the Zacks Consensus Estimate of $191 million.

Myriad Genetics, Inc. Price, Consensus and EPS Surprise

Myriad Genetics, Inc. Price, Consensus and EPS Surprise | Myriad Genetics, Inc. Quote

The year-over-year rise in the top line was primarily on account of sequential growth in hereditary cancer revenues and strong results from GeneSight.

Segment-wise, Molecular diagnostic tests (93.5% of total revenue) recorded total revenue of $183.9 million, up 1% year over year, mainly on account of EndoPredict testing revenues which surged 78% to $1.6 million. Prolaris testing revenues also rose 63% to $3.1 million. However, Hereditary cancer testing revenues dropped 13% year over year to $143.9 million, Vectra DA testing revenues fell 5% to $10.7 million and other testing revenues remained flat at $2.9 million.

On the other hand, Pharmaceutical and clinical service revenues (accounting for the rest) in the second quarter of 2017 grossed $12.6 million, reflecting year-over-year growth of 18%.

Margin Trends

Gross margin in the quarter under review contracted 160 basis points (bps) to 77.4%. According to management, this decline was due to unfavorable product mix with more revenues coming in from lower margin segments such as pharmaceutical and clinical services along with reduced fixed cost absorption on lower hereditary cancer revenues. Additionally, the company witnessed an impact from the full implementation of long-term contracts in hereditary cancer.

Operating expenses rose 29.2% to $139 million owing to a 32.5% rise in selling, general and administrative (SG&A) expenses to $120 million. Research and development (R&D) expenses rose 11.4% (to $19 million) in the reported quarter. Consequently, the operating margin contracted a stupendous 1348 bps, down 48.1%.

Financial Position

Myriad exited the second quarter of fiscal 2017 with cash, cash equivalents and marketable securities of $162.5 million, higher than $148.4 million at the end of first-quarter 2017. Year to date, cash used in operations totaled $28.5 million, down 65.2% year over year. Consequently, free cash flow was down to $29.0 million from $39.8 million a year ago. The company repurchased 6.0 million shares for $10 million during the second quarter of 2017.

Guidance

Myriad narrowed its earlier guidance for fiscal 2017. The company currently expects revenues in the range of $745-$755 million, compared to the earlier expectation of $740-$760 million. The Zacks Consensus Estimate of $760.2 million is above the range.

On the bottom-line front, the company expects to generate adjusted EPS in the band of $1.00-$1.05, reducing the higher end by 5 cents from the previous one ($1.00-$1.10). The current Zacks Consensus Estimate of 99 cents lies below Myriad's guidance.

Alongside, management has provided its outlook for the third quarter of fiscal 2017. The company estimates adjusted earnings per share at 23-25 cents on total revenues of $188-$190 million. The Zacks Consensus Estimate for adjusted EPS is pegged at 26 cents and revenues at $192 million, which exceeds the company's guided range.

Our View

Myriad recorded impressive second-quarter fiscal 2017 results with both earnings and revenues beating the Zacks Consensus Estimate. The company particularly observed strong growth in both Prolaris and Vectra DA testing revenues. Revenues in the second quarter reached the highest level in the last three years, buoyed by a return to sequential growth in hereditary cancer revenues and strong results from GeneSight.

On the flip side, a weak gross margin scenario is dampening. Also, the company's narrowed guidance for fiscal 2017 is also discouraging.

Zacks Rank & Key Picks

Myriad currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are Glaukos Corporation GKOS , Cardiovascular Systems CSII and Neogen Corp. NEOG . Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Glaukos gained over 100% in the last one year in comparison to the S&P 500's gain of only 23.8%. The company has a stellar four-quarter average earnings surprise of over 100%.

Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.

Neogen gained 32.7% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth of 16.7% for the next five years compared to the industry average of 15.2%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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