Accuray Inc. ( ARAY ) is set to report second-quarter 2015 results on Jan 27. Last quarter, the company posted loss of 28 cents per share, which was significantly wider than the Zacks Consensus Estimate of a loss of 13 cents.
Let's see how things are shaping up for this quarter.
Factors This Past Quarter
Accuray's preliminary second-quarter results failed to impress us. The company estimates revenues of more than $97 million, up 4% year over year (7% at constant currency), which lags the current Zacks Consensus Estimate of $101 million.
Gross orders are estimated to be $72 million, while net orders are expected to be approximately $41 million, including $18 million to age-outs. Although the company did not lose any order to competitors, cancellations were $7 million in the quarter.
A strong U.S. dollar continues to hurt net orders. Most importantly, backlog decreased 1.7% (6 million) in the quarter, which will remain an overhang on results in our view.
On the other hand, Chinese NHFPC issued 6 licenses for Accuray products in Dec, 2014, which is a significant positive. Moreover, one system order was recognized in backlog during the second quarter, while two orders are expected fall under the third and fourth quarter backlog. This is expected to considerably improve top-line growth going forward.
Our proven model does not conclusively show that Accuray is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or at least 3 for this to happen. That is not the case here as you will see below.
Zacks ESP : Accuray currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 9 cents.
Zacks Rank : Accuray carries a Zacks Rank #4 (Sell).
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a few stocks worth considering that, as per our model, have the right combination of elements to post an earnings beat this quarter:
Hologic ( HOLX ) with an Earnings ESP of +2.78% and a Zacks Rank #1 (Strong Buy).
AbbVie ( ABBV ) with an Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).
IntersectENT ( XENT ) with an Earnings ESP of +11.11% and a Zacks Rank #2.