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Genomic Health (GHDX) Q4 Earnings & Revenues Miss Estimates

Zacks Equity Research
Updated

Genomic Health, Inc. GHDX reported fourth-quarter 2017 adjusted earnings per share (EPS) of 8 cents, reflecting an improvement from the year-ago quarter’s 4 cents. Adjusted EPS however missed the Zacks Consensus Estimate of 9 cents.

Reported EPS came in at 5 cents, improving from the year-ago figure by a penny.

Full-year 2017 adjusted EPS came in at a penny, comparing favorably with the Zacks Consensus Estimate of a loss of 9 cents and the year-ago number of a loss of 42 cents.

Revenues in Detail

Total revenues in the quarter rose 5.8% year over year to $87.5 million, missing the Zacks Consensus Estimate of $89.1 million. Growth in the United States and international markets drove the top line. Moreover, during the quarter, Genomic Health witnessed solid U.S. invasive breast cancer growth.

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Net revenues in 2017 totaled $340.8 million, missing the Zacks Consensus Estimate of $343.1 million. The figure however improved 3.9% from the year-ago number.

Genomic Health, Inc. Price, Consensus and EPS Surprise

 

Genomic Health, Inc. Price, Consensus and EPS Surprise | Genomic Health, Inc. Quote

Geographically, fourth-quarter product revenues in the United States rose 5% to $73.5 million. The U.S. product revenue growth was fueled by a 38.9% rise in Prostate test revenues to $5 million and a 3.6% hike in invasive breast cancer revenues to $66.2 million. International product revenues totaled $13.7 million in the reported quarter, up 14.2%.

During the quarter, the company delivered more than 31,990 Oncotype DX test results, up 6.6% year over year.

Margin Trend

In the quarter under review, Genomic Health’s gross margin expanded 80 basis points (bps) year over year to 84.2%.

The company also witnessed a 5.6% rise in operating expenses to $71.4 million owing to a 0.61% rise in research and development expenses to $14.9 million, 11.1% uptick in general and administrative expenses to $20 million and 5.2% increase in selling and marketing expenses to $36.5 million.

In the reported quarter, Genomic Health reported an operating income of $2.2 million, showing a year-over-year improvement from $1.5 million a year ago. Accordingly, the operating margin expanded 70 bps to 2.5%.

Financial Update

Genomic Health exited 2017 with cash and cash equivalents and short-term marketable securities (including a corporate equity investment) of $129.6 million, reflecting an improvement from $97 million recorded at the end of 2016.

2018 Guidance

The company issued guidance for 2018. Genomic Health expects full-year 2018 revenues in the range of $366-$382 million, reflecting growth of 10-15%. The Zacks Consensus Estimate of $384.1 million is above the guided range.

The company expects adjusted basic EPS in the band of 39-56 cents. The Zacks Consensus Estimate is pegged at 34 cents.

Our Take

Genomic Health exited fourth-quarter 2017 on a disappointing note.

Nevertheless, we are encouraged by the year-over-year rise in revenues, driven by solid performances in United States and internationally. Within prostate cancer, the Oncotype DX Genomic Prostate Score test witnessed expanded private coverage. We are also upbeat about the company’s signing of an exclusive licensing agreement with Cleveland Diagnostics and research collaboration agreement with Janssen Pharmaceuticals. Also, the launch of Oncotype DX AR-V7 Nucleus Detect buoys optimism. The company also witnessed positive developments for its Oncotype DX Breast Recurrence Score tests.

Genomic Health’s sole reliance on the Breast Oncotype DX test is a concern. Moreover, the company’s rising operating expenses pose a challenge.

Zacks Rank & Key Picks

Genomic Health carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks that reported solid results this earnings season are PetMed Express PETS, PerkinElmer PKI and athenahealth, Inc. ATHN. While PetMed and athenahealth sport a Zacks Rank #1 (Strong Buy), PerkinElmer carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported third-quarter fiscal 2018 results. Adjusted EPS of 44 cents was up 88.3% from the prior-year quarter. Revenues rose 13.7% to $60.1 million.

PerkinElmer posted fourth-quarter 2017 adjusted EPS of 97 cents. Adjusted revenues were approximately $641.6 million, up from $567 million a year ago.

athenahealthreported adjusted EPS of $1.11 in the fourth quarter of 2017, up 79% on a year-over-year basis.Revenues totaled $329 million, up 14.2%.

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