Accuray's (ARAY) Q1 Earnings and Revenues Lag Estimates

Accuray Incorporated ARAY reported a loss of 6 cents per share for the first quarter of fiscal 2023, wider than the Zacks Consensus Estimate and the year-ago period loss of a penny per share.

We had projected the loss per share to be at a break-even level.

Revenues in Detail

Accuray registered revenues of $96.5 million in the first quarter of fiscal 2023, down 10.2% year over year. The figure missed the Zacks Consensus Estimate by 8.2%.

The fiscal first-quarter revenue compares to our estimate of $114.6 million.

Segmental Details

Accuray derives revenues from two sources — Products and Services.

In the fiscal first quarter, Product revenues declined 15.4% from the year-ago quarter to $44.6 million. This figure compares to our Product revenues’ fiscal Q1 projection of $57 million.

Services revenues fell 5.1% from the year-ago quarter to $51.9 million. This figure compares to our Services revenues’ Q1 projection of $57.6 million.

Gross product orders totaled $69.8 million, down 0.2% year over year. This figure compares to our gross orders’ Q1 projection of $72.7 million.

Accuray Incorporated Price, Consensus and EPS Surprise

Accuray Incorporated Price, Consensus and EPS Surprise

Accuray Incorporated price-consensus-eps-surprise-chart | Accuray Incorporated Quote

Margin Trend

In the quarter under review, Accuray’s gross profit fell 12.5% to $34.6 million. Gross margin contracted 93 basis points (bps) to 35.9%.

We had projected 37.8% of gross margin for Q1.

Selling and marketing expenses fell 4.2% to $10.8 million. Research and development expenses fell 2% year over year to $14.1 million, while general and administrative expenses went up 3.8% year over year to $11.9 million. Total operating expenses of $36.8 million declined 0.9% year over year.

Total operating loss was $2.2 million in the fiscal first quarter against the prior-year quarter’s operating profit of $2.4 million.

Financial Position

Accuray exited the first quarter of fiscal 2023 with cash and cash equivalents of $81 million compared with $88.7 million at the end of fiscal 2022.

Total debt (including short-term debt) at the end of the fiscal first quarter was $176.3 million compared with $180.5 million at the end of fiscal 2022.

FY23 Guidance

Accuray reiterated its outlook for fiscal 2023 based on current expectations.

The company continues to expect its fiscal-year revenues to be $447 million-$455 million, reflecting year-over-year growth at the midpoint of the range of 5%. The Zacks Consensus Estimate for the same is pegged at $451.2 million.

Our Take

Accuray’s lower-than-expected results in the first quarter of fiscal 2023 are disappointing. The dismal top-line and bottom-line results, along with lower revenues from both its sources, are disappointing. The decline in gross orders is also worrying. The adverse revenue impact in China due to the COVID lockdown is concerning. The gross margin contraction also does not bode well. Accuray incurred an operating loss in the fiscal first quarter, which further raises our apprehension. The current global supply-chain shortages and inflationary pressure are other challenges the company is navigating through, which is another concern.

On a positive note, continued strong demand for Accuray’s ClearRT Helical kVCT Imaging for the Radixact System, Synchrony Technology and VOLO Ultra enhancement looks promising. The company launched VitalHold, an integrated, automated, surface-guided radiotherapy solution for breast cancer patients on the Radixact system in partnership with C-RAD (in October), which is encouraging.

Robust new system orders for Radixact and the CyberKnife S7 driven by the Americas and APAC regions are also encouraging. Accuray’s latest global commercial partnership with GE Healthcare to expand access and advance Precision Radiation Therapy (in October) buoys optimism about the stock.

Zacks Rank and Key Picks

Accuray currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health Inc. ELV, Medpace Holdings, Inc. MEDP and Merit Medical Systems, Inc. MMSI.

Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.

Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.

Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.

Merit Medical, flaunting a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.

Merit Medical has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.

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