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Merit Medical Systems, IncMMSI announced favorable 6-month results from the randomized arteriovenous (AV) fistula arm of its pivotal WRAPSODY Arteriovenous Access Efficacy (WAVE) trial. The data were presented at the Cardiovascular and Interventional Radiological Society of Europe.
The WAVE trial is evaluating WRAPSODY, a cell-impermeable endoprosthesis, in dialysis patients for maintaining vessel patency. Data from the AV fistula arm expands upon the previously completed first-in-human study, WRAPSODY FIRST, and will support the company’s Premarket Approval application to the FDA. WRAPSODY is already approved and available for use in Europe and Brazil.
Following the news, shares of MMSI declined 1.1% to $98.51 at yesterday’s close. The company's ongoing advancements and positive product developments are expected to counterbalance the challenges it faces, like integrating acquisitions, managing manufacturing transitions and dealing with currency fluctuations.
Its accelerated introduction of cutting-edge products, combined with strong patient and physician adoption as well as ongoing regulatory approvals, is expected to drive growth.
Impact of WRAPSODY WAVE Trial Results on Merit Medical
Data from the AV fistula arm of the WAVE trial demonstrated that patients treated with ERAPSODY achieved a 27% higher target lesion primary patency rate of 89.8% compared to 62.8% for those receiving percutaneous transluminal angioplasty. The rate of adverse events was similar between the two groups. The data shows that WRAPSODY improves the maintenance of sufficient blood flow through the AV fistula in dialysis patients compared to PTA.
WRAPSODY's superior efficacy highlights its importance in extending the longevity of vascular access in dialysis treatment, which is critical for patient survival. These positive results mark a pivotal step toward improving vascular access maintenance for dialysis patients, positioning WRAPSODY as a potential new standard of care. The six-month efficacy data is highly compelling, allowing clinicians to assess WRAPSODY's ability to extend vascular access for patients. WRAPSODY has the potential to become the new standard of care.
In the United States, WRAPSODY is currently being used under an Investigational Device Exemption from the FDA.
Market Prospects Favoring MMSI
Per a report in Future Market Insights, the global arteriovenous fistula (AVF)treatment market size was worth $765.8 million in 2023. It is anticipated to reach $1.4 billion by 2033 at a CAGR of 5.9%.
The robust growth is likely to be driven by the introduction of innovative methods like photodynamic therapy, antiangiogenic therapy and sclerotherapy. However, effective and easy-to-use treatments are still in development, driving ongoing innovation and shaping market trends. Nonetheless, the high prevalence of AVF and limited treatment options continue to fuel market expansion.
MMSI Stock Price Performance
Shares of Merit Medical have risen 29.7% year to date compared with the industry’s 0.8% growth. The S&P 500 has witnessed an 18.1% rise in the same time frame.
Zacks Rank & Key Picks
Currently, Merit Medical carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Universal Health Services UHS, ATI Physical Therapy ATIP and Aveanna Healthcare AVAH. While Universal Health Services sports a Zacks Rank #1 (Strong Buy), ATI Physical Therapy and Aveanna Healthcare carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Services has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Services has gained 41.1% compared with the industry's 34.8% growth year to date.
ATI Physical Therapy's earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.25%.
ATIP's shares have surged 5.5% year to date compared with the industry’s 18.6% growth.
Aveanna Healthcare's earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 47.5%.
AVAH's shares have surged 104.5% year to date compared with the industry’s 15.7% growth.
Zacks Investment Research
Cardinal Health CAH and Australia-based Telix recently entered a deal, selecting CAH as a commercial radiopharmaceutical distributor to supply finished unit doses of Telix's PET agent, Zircaix, for the imaging of kidney cancer in the United States, subject to regulatory approval.
Telix and Cardinal Health already have a contract in place under which CAH has successfully commercialized Telix’s PSMA-PET imaging, Illuccix, approved for diagnosing prostate cancer in men.
Likely Trend of CAH Stock Following the News
Following the announcement, shares of the company moved nearly 1.7% south to $111.32 at yesterday’s closing.
Cardinal Health has a competitive advantage in the specialized market attributable to its pharmaceutical and medical solutions. The company provides a growing range of safe products and industry knowledge. Through its partnerships and investments in Specialty, at-Home, and Services, the company continues to retain its focus on dynamic development sectors.
As the company continues to adopt robust business models for the future, it is also strengthening its core strengths related to product distribution and medical and pharmaceutical. Hence, owing to the strong future prospects of CAH, we expect the market sentiment to remain positive around this news as well.
Meanwhile, CAH currently has a market capitalization of $27.62 billion. It has an earnings yield of 6.72%, higher than the industry’s yield of 5.46%. In the last reported quarter, CAH delivered an earnings surprise of 6.98%.
More on CAH’s Distribution Deal With Telix
Cardinal Health’s broad commercial distribution network and experience are likely to enable reliable Zircaix supply across the United States to aid in kidney cancer diagnosis following its potential approval. Telix completed the submission of a Biologics License Application (BLA) to the FDA seeking approval for Zircaix in June. The company has requested a priority review of the BLA.
Telix is currently running special access programs in the United States, Europe and Australia to allow continued access to Zircaix outside of a clinical trial to patients for whom there are no comparable or satisfactory alternate options. Per the terms of the distribution deal with Telix, CAH will be responsible for the distribution of the drug under the expanded access program in the United States.
Per the American Cancer Society, about 81,610 new cases of kidney cancer are likely to be diagnosed in 2024, representing a significant market opportunity for Zircaix that is expected to benefit both Telix and Cardinal Health.
CAH’s Notable Distribution Network
Cardinal Health is strategically expanding its U.S. operations to better serve healthcare providers and patients by investing in new facilities and technology solutions. In September, CAH announced the opening of a new distribution center in Greenville, SC.
The distribution center is dedicated solely to the company’s at-Home Solutions business. The opening of the new distribution center is likely to provide a boost to the company’s at-Home Solutions business and generate additional revenues to support the growing market for at-Home solutions.
In August, CAH announced plans to open a new state-of-the-art distribution center in Walton Hills, OH, to support its medical products and distribution business in the United States. In 2023, the company opened two distribution centers in Central Ohio and a medical products replenishment center in New York, bolstering inventory levels and supply chain efficiency.
CAH’s Share Price Performance
In the past six months, CAH’s shares have gained 1.3% against the industry’s 4.5% decline. The S&P 500 has increased 9.4% in the same time frame.
CAH’s Zacks Rank & Stocks to Consider
CAH presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Universal Health Service UHS, Quest Diagnostics DGX and ABM Industries ABM. While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 56.1% compared with the industry's 48.1% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 13.9% so far this year compared with the industry’s 17.9% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 27.4% so far this year compared with the industry’s 17% growth.
Zacks Investment Research
Investors generally consider a 52-week high a good criterion for determining an entry or exit point for a given stock. However, stocks touching new 52-week highs are often predisposed to profit-taking, resulting in pullbacks and trend reversals.
Moreover, given the high price, investors often wonder if the stock is overpriced. While the speculation is not absolutely baseless, all stocks hitting a 52-week high are not necessarily overpriced.
In fact, investors might lose out on top gainers in an attempt to avoid the steep prices.
Stocks such as Century Communities CCS, Powell Industries POWL, Sylvamo SLVM, IAMGOLD IAG and Universal Health Services UHS are expected to maintain their momentum and keep scaling new highs. More information on a stock is necessary to understand whether or not there is scope for further upside.
Here, we discuss a strategy to find the right stocks. The technique borrows from the basics of momentum investing and bets on “buy high, sell higher.”
52-Week High: A Good Indicator
Many times, stocks that hit a 52-week high fail to scale higher despite having potential. This is because investors fear that the stocks are overvalued and expect the price to crash.
Overvaluation is natural for most of these stocks as investors’ focus (or willingness to pay the premium) has helped them reach the level. But that does not always indicate an impending decline. Factors such as robust sales, surging profit levels, earnings growth prospects and strategic acquisitions that encouraged investors to bet on these stocks could keep them motivated if there is no tangible negative. In other words, the momentum might continue.
Also, when a string of positive developments dominates the market, investors find their under-reaction unwarranted, even if there are no company-specific driving forces.
Setting the Right Filters
We ran a screen to zero in on 52-week high stocks (trading near the high level) that hold tremendous upside potential. The screen includes parameters to shortlist stocks with strong earnings growth expectations, sturdy value metrics and price momentum.
Moreover, the screen filters stocks that are relatively undervalued compared to their peers in terms of earnings as well as sales, ensuring the continuation of their rally for some time.
Current Price/52 Week High >= .80
This is the ratio between the current price and the highest price at which the stock has traded in the past 52 weeks. A value greater than 0.8 implies the stock is trading within 20% of its 52-week high range.
% Change Price – 4 Weeks > 0
It ensures that the stock price has moved north over the past four weeks.
% Change Price – 12 Weeks > 0
This metric guarantees a continued upward price momentum for the stock over the past three months as well.
Price/Sales <= XIndMed
The lower, the better.
P/E using F(1) Estimate <= XIndMed
This metric measures the amount an investor puts into a company to obtain one dollar of earnings. It narrows down the list of stocks to those that are undervalued compared to the industry.
One-Year EPS Growth F(1)/F(0) >= XIndMed
This helps choose stocks that have higher growth rates than the industry. This is a meaningful indicator, as decent earnings growth adds to investor optimism.
Zacks Rank =1
No screening is complete without the Zacks Rank, which has proved its worth since its inception. It is a fundamental truth that stocks with a Zacks Rank #1 (Strong Buy) have always managed to brave adversities and beat the market average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Current Price >= 5
This parameter will help screen stocks that are trading at $5 or higher.
Volume – 20 days (shares) >= 100000
The inclusion of this metric ensures that there is a substantial volume of shares, so trading is easier.
Here are our five picks out of the 13 stocks that made it through the screen:
Century Communities is a home building and construction company. Its activities comprise land acquisition, development and entitlements, and the acquisition, development, construction, marketing, and sale of various single-family detached and attached residential home projects. The company’s initiative of offering affordable homes along with several incentive offerings, including lot premiums, interest rate buydowns and discounts on base home prices, is expected to be a tailwind. Also, its focus on building homes on a spec basis bodes well. This initiative of the company helps in direct cost control, sparks the availability of quick move-ins and assures buyers of financing certainty.
Furthermore, despite the improving inventory of existing home sales, the company is likely to benefit from increasing new home contracts, thanks to its improved cycle times and increased level of home starts. The company’s focus on affordability, along with the reduced cycle times and cost-reduction initiatives, positions it well for the rest of 2024.
The Zacks Consensus Estimate for 2024 earnings has moved north by 0.8% to $10.72 per share in the past 30 days. CCS surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 35.57%.
Powell Industries is a prominent electrical equipment manufacturer, riding on its strong foothold and improving conditions in two key markets — oil and gas and petrochemical. The company’s efforts to strengthen its project portfolio beyond the core oil and gas, and petrochemical end markets have also enhanced its market share across the utility, commercial and other industrial markets. POWL is also benefiting from increased demand for electrical power from data centers.
Powell is strengthening its participation across the electrical power value chain and benefiting from solid momentum in data center and utility markets. The company witnessed strong bookings in electric utility and commercial markets in the first nine months of fiscal 2024 in the United States. Powell’s capacity expansion initiatives, particularly at the product factory in Houston, bode well. The expansionary efforts have been enabling the company to better serve its customers with enhanced offerings across data centers, hydrogen, carbon capture and other transitional energy markets.
The Zacks Consensus Estimate for fiscal 2024 earnings has remained steady at $12.01 per share over the past 30 days. POWL surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 69.88%.
Sylvamo produces and markets uncoated freesheet for cut size, offset paper and pulp. Stronger order books and higher pulp and paper prices are likely to aid its top-line growth in the near term. The company has initiated a cost-reduction program called Project Horizon, which is focused on streamlining its organization and cost structures in an effort to make a leaner, stronger company.
SLVM is on track to realize savings of at least $110 million by the end of 2024. Around $80 million of the target will come from operational improvements in its mills and supply chains and the balance from the reduction in selling and administrative expenses. The company continues to lower its debt levels and maintains a strong financial position that enables it to invest in its business. It has a pipeline of more than $200 million of high-return capital projects, which will boost its earnings and cash flow profile.
Earnings estimates for Sylvamo’s fiscal 2024 have remained steady at $7.40 per share over the past 30 days. SLVM surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 23.97%.
IAMGOLD is an international gold exploration and mining company based in Canada. IAG is poised for growth, supported by an upward trend in gold prices, the ongoing ramp-up at Côté Gold, and the established portfolio of early-stage and advanced exploration projects within high-potential mining districts. IAG continues to invest in maximizing production and increasing the life of its existing mines, advancing development and exploration projects.
IAMGOLD expects production from the Côté Gold mine in 2024 to be near the lower end of 130,000-175,000 ounces (on a 60.3% basis). IAG has the financing in place and is set to buy a 9.7% interest in Côté Gold on Nov. 30, 2024. This will take its stake in the project to 70%. We expect the contribution from the mine to IAG’s production in 2024 to be higher once this deal is completed. Significant operational projects planned for the next years include the Westwood ramp-up to safely access other mining areas that were affected by the seismic activity in 2020.
The Zacks Consensus Estimate for 2024 earnings has moved north by 5.1% to 41 cents per share in the past 30 days. IAG surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 200%.
Universal Health Services owns and operates (through its subsidiaries) acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers. Universal Health's Acute Care and Behavioral Health segments have been pivotal in driving top-line growth, fueled by expansions in licensed bed capacity. The company anticipates positive impacts on its Acute Care unit from Medicaid supplemental programs. Strategic buyouts have played a significant role in augmenting its growth trajectory by broadening its portfolio of facilities. It beat second-quarter earnings estimates on Acute Care strength. The company maintains a robust liquidity position, enabling it to pursue growth initiatives and distribute capital through buybacks and dividends. It has resorted to a constant dividend payout of 20 cents per share since 2019.
The Zacks Consensus Estimate for UHS’ 2024 earnings has remained steady at $15.91 per share in the past 30 days. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 14.58%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and back-testing software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.Disclosure: Performance information for Zacks' portfolios and strategies are available at: https://www.zacks.com/performance/.
Zacks Investment Research
Sept 17 (Reuters) - Universal Health Services Inc UHS.N:
UNIVERSAL HEALTH SERVICES, INC. ANNOUNCES PRICING OF SENIOR SECURED NOTES
UNIVERSAL HEALTH SERVICES INC - PRICES $500 MILLION OF 4.625% NOTES DUE 2029 AND $500 MILLION OF 5.050% NOTES DUE 2034
Source text for Eikon: (Full Story)
Further company coverage: UHS.N
HCA Healthcare, Inc. HCA shares have gained 18.4% in the past three months, outperforming the hospital industry and the S&P 500 Index. Over this time frame, the industry and the S&P 500 Index have gained 16% and 2.2%, respectively.
Currently priced at $403.43, the stock is less than 1% below its 52-week high. This proximity underscores investor confidence and market optimism about this hospital company’s prospects. Moreover, the stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum.
HCA 3-Month Price Performance
HCA’s Growth Prospects
Growing volumes is an important determinant for a healthcare facility operator like HCA Healthcare. The company is seeing elevated demand for its services driven by aging baby boomers, a higher number of people under insurance coverage through their employers or exchanges, COVID migration patterns, and increasing market share. The company saw a 6.4% year-over-year increase in admissions during the first half of 2024. Expected strong demand in the coming days poises the company’s top line well for growth.
The company is effectively meeting growing volumes by expanding capacity and enhancing efficiency, excelling on both fronts. Growing inpatient beds and outpatient facilities are expected to help the company meet the increasing volumes. Reduced length of stay is expected to positively impact the company’s operational efficiency. Contract labor is being managed well, as it came in at 4.8% of the total salaries, wages, and benefits, lower than 6.8% in the year-ago quarter.
Another aspect of margin improvement HCA is focusing on is artificial intelligence (AI). It can be used for staffing, scheduling, revenue cycle management etc. Although the company is still in the early stages of implementing AI, it expects the technology component of its capital expenditures to continue growing. The company expects to incur $5.1-$5.2 billion in capital expenditures in 2024 to expand existing operations. A strong footprint in its rapidly growing markets, such as Florida and Texas, bode well.
HCA’s strong prospects led it to revise its top-line guidance upward between $69.8 billion and $71.8 billion in 2024 from the previous guidance of $67.8 billion-$70.3 billion. It projects adjusted EBITDA in the range of $13.8-$14.3 billion for 2024, up from $12.9-$13.6 billion.
HCA Healthcare’s strong profitability enables it to consistently enhance shareholder value. In the last reported quarter, it returned $1.4 billion to shareholders through share buybacks and $170 million as dividends. The company had $4.2 billion remaining under its repurchase program as of June 30, 2024. It expects to repurchase shares worth $6 billion in 2024. With a dividend yield of 0.65%, HCA is ahead of the industry average of 0.51%.
HCA’s Efficient Capital Utilization
The company’s return on invested capital (ROIC) has been increasing for quite some time. This reflects HCA’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 14.9%, higher than the industry’s average of 12.6%.
Optimistic Analyst Sentiment for HCA
Reflecting the positive sentiment around HCA Healthcare, the Zacks Consensus Estimate for earnings per share has seen upward revisions. The consensus estimate for 2024 adjusted EPS for HCA is currently pegged at $22.46, indicating 18.2% year-over-year growth. The consensus mark for 2025 EPS suggests a further 10.9% jump year over year.
The company beat earnings estimates in three of the past four quarters, missed once, with an average surprise of 8.2%. The consensus estimate for 2024 and 2025 revenues suggests 8.9% and 5.3% year-over-year growth, respectively.
HCA’s Valuation
From a valuation perspective, HCA appears marginally expensive. The company is trading at a forward 12-month price-to-earnings multiple of 16.68X, a bit higher than the industry average of 16.39X.
In comparison, its peers like Tenet Healthcare Corporation THC and Universal Health Services, Inc. UHS are currently trading at forward 12-month price-to-earnings of 15.1X and 13.82X, respectively.
Wrapping Up
HCA Healthcare stock is expected to benefit from strong demand growth, driven by aging demographics, increased insurance coverage, and market expansion. Despite a marginally higher valuation compared to the industry, HCA's upward guidance and commitment to shareholder returns make it an attractive investment to add to your portfolio.The upward revisions in estimates suggest a promising outlook ahead, making this opportunity too good to pass up.
As such, HCA Healthcare currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks Investment Research
ATI Physical Therapy, Inc. (ATIP) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates -- one of the most powerful forces impacting stock prices.
The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.
Individual investors often find it hard to make decisions based on rating upgrades by Wall Street analysts, since these are mostly driven by subjective factors that are hard to see and measure in real time. In these situations, the Zacks rating system comes in handy because of the power of a changing earnings picture in determining near-term stock price movements.
Therefore, the Zacks rating upgrade for ATI Physical Therapy basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price.
Most Powerful Force Impacting Stock Prices
The change in a company's future earnings potential, as reflected in earnings estimate revisions, and the near-term price movement of its stock are proven to be strongly correlated. That's partly because of the influence of institutional investors that use earnings and earnings estimates for calculating the fair value of a company's shares. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their transaction of large amounts of shares then leads to price movement for the stock.
For ATI Physical Therapy, rising earnings estimates and the consequent rating upgrade fundamentally mean an improvement in the company's underlying business. And investors' appreciation of this improving business trend should push the stock higher.
Harnessing the Power of Earnings Estimate Revisions
As empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock movements, tracking such revisions for making an investment decision could be truly rewarding. Here is where the tried-and-tested Zacks Rank stock-rating system plays an important role, as it effectively harnesses the power of earnings estimate revisions.
The Zacks Rank stock-rating system, which uses four factors related to earnings estimates to classify stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record, with Zacks Rank #1 stocks generating an average annual return of +25% since 1988. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Earnings Estimate Revisions for ATI Physical Therapy
This company is expected to earn -$9.70 per share for the fiscal year ending December 2024, which represents a year-over-year change of 69.6%.
Analysts have been steadily raising their estimates for ATI Physical Therapy. Over the past three months, the Zacks Consensus Estimate for the company has increased 21.6%.
Bottom Line
Unlike the overly optimistic Wall Street analysts whose rating systems tend to be weighted toward favorable recommendations, the Zacks rating system maintains an equal proportion of 'buy' and 'sell' ratings for its entire universe of more than 4000 stocks at any point in time. Irrespective of market conditions, only the top 5% of the Zacks-covered stocks get a 'Strong Buy' rating and the next 15% get a 'Buy' rating. So, the placement of a stock in the top 20% of the Zacks-covered stocks indicates its superior earnings estimate revision feature, making it a solid candidate for producing market-beating returns in the near term.
The upgrade of ATI Physical Therapy to a Zacks Rank #2 positions it in the top 20% of the Zacks-covered stocks in terms of estimate revisions, implying that the stock might move higher in the near term.
Zacks Investment Research
Accuray Incorporated ARAY is well-poised for growth in the coming quarters, courtesy of continued robust demand for its products. The optimism, led by robust international performance in fourth-quarter fiscal 2024 performance and potential in the Precision Treatment Planning System (TPS) and Radiosurgery Market, is expected to contribute further. However, reimbursement uncertainties and stiff competition are concerning.
This Zacks Rank #3 (Hold) company has lost 23% in the year-to-date period against 9.2% growth of the industry. The S&P 500 has witnessed 17.8% growth in the said time frame.
The renowned radiation oncology company has a market capitalization of $217.4 million. Accuray projects 93.8% growth for fiscal 2025 and expects to maintain its strong performance going forward. The company has a P/S ratio of 0.5 compared with the industry’s 4.6.
Reasons Favoring Accuray’s Growth
Potential in Precision TPS: We are optimistic about the Accuray Precision TPS, which offers an efficient way for clinicians to create high-quality radiation therapy treatment plans for various cases. It includes features such as multi-modality image fusion with a unique deformable image registration algorithm, a comprehensive set of contouring tools and options for AutoSegmentation auto contouring for specific body areas.
In June, Accuray announced that the registration dossier for the Accuray Precision TPS had been approved by the Chinese National Medical Products Administration. The Accuray Precision TPS is now available for use with the CNNC-Accuray joint venture Tomo C radiation therapy system.
Potential in Radiosurgery Market: Accuray’s CyberKnife System is a robotic radiosurgery system capable of treating tumors throughout the body. There is an extensive body of published literature supporting the use of the CyberKnife System in the treatment of various targets, including cancers, benign tumors, or functional diseases. With more than two decades of clinical evidence, the CyberKnife System offers distinct advantages in the treatment of diseases in the head, base of the skull, and spine.
During the fiscal fourth quarter, management commented on the strong customer adoption of the CyberKnife system. The company witnessed 31% year-over-year growth in CyberKnife system orders. Per management, the rapidly growing clinical trends toward shorter courses of the latest treatments from one to five sessions, backed by clinical data over the long term for areas like prostate, lung, and neuro treatments, is driving the increase in CyberKnife system demand.
Robust Product Demand: Accuray’s products have been registering robust customer adoption over the past few months. During the fiscal fourth quarter, Accuray implemented the first installations of the VitalHold surface-guided radiation therapy (SGRT) on the Radixact System in Japan. In September, Accuray announced that Gifu Prefectural General Medical Center is setting a new standard in cancer care in Japan as the first hospital in the country to treat patients with SGRT using the company's Radixact Radiation Delivery System and VitalHold package.
In August, Accuray announced that Halifax Health in Florida is the first in the United States to treat cancer patients using the Accuray Radixact Radiation Delivery System and VitalHold Technology.
In June, Accuray announced today that long-term customer Heidelberg University Hospital in Heidelberg, Germany, has selected the company's Radixact System, equipped with its proprietary ClearRT, Synchrony and VOLO Ultra Optimizer solutions, to help transform its approach to cancer care.
Strong Revenue Growth: Per management, Product revenues contributed materially to growth in the fiscal fourth quarter, up approximately 28% year over year. The growth was driven by strong demand in China where product revenues grew 55% and orders increased 80% compared with the prior year. On the fourth quarter of fiscal 2024 earnings call in August, management commented that its EIMEA (Europe, India, the Middle East and Africa) region’s product revenues increased 27%. Per Accuray, the Latin America region witnessed order growth of more than 400% in the fiscal fourth quarter.
On the fiscal fourth-quarter earnings call, management announced that it had received CE Mark for Accuray Helix, a CT-guided helical radiotherapy system designed to provide high performance and high throughput. Management also confirmed that it is continuing with early market launch efforts for Helix (Accuray’s non-China access product) first in India.
Factors That May Offset the Gains for ARAY
Tough Competition: Rapid technological advancements and strong competition characterize the medical device sector in general and the non-invasive cancer treatment sector in particular.
Accuray needs to convince physicians and other healthcare decision-makers about the benefits of its products and technology. To compete successfully, the company has to highlight the advantages of its products over other well-established alternatives.
Reimbursement Uncertainties: Accuray’s customers rely significantly on reimbursement from public and private third-party payors for the CyberKnife and TomoTherapy platform procedures. The company’s ability to commercialize its products successfully and increase market acceptance of the same will significantly depend on the extent to which public and private third-party payors provide adequate coverage and reimbursement for procedures that are performed with Accuray’s products and the extent to which patients who are treated by its products continue to be covered by health insurance. Third-party payors may establish or change the reimbursement for medical products and services that could significantly influence the purchase of the same.
Estimate Trend
Accuray has been witnessing a stable estimate revision trend for fiscal 2025. Over the past seven days, the Zacks Consensus Estimate for earnings has remained stable at a loss of 1 cent per share.
The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $98.1 million, suggesting a 5.6% decline from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Universal Health Service UHS, Quest Diagnostics DGX and ABM Industries ABM. While Universal Health Service sports a Zacks Rank #1 (Strong Buy), Quest Diagnostics and ABM Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.
Universal Health Service has gained 56.1% compared with the industry's 48.1% rise so far this year.
Quest Diagnostics has an estimated long-term growth rate of 6.20%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.
Quest Diagnostics shares have gained 13.9% so far this year compared with the industry’s 17.9% rise.
ABM Industries’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 7.34%.
ABM's shares have risen 27.4% so far this year compared with the industry’s 17% growth.
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