Myriad Genetics (MYGN) Down 3% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Myriad Genetics, Inc. (NASDAQ:MYGN) . Shares have lost about 3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is MYGN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Myriad Genetics reported adjusted earnings per share (EPS) of 31 cents in the second quarter of fiscal 2018, up 19.2% year over year. Moreover, adjusted EPS beat the Zacks Consensus Estimate by a solid margin of 29.2% and exceeded the company’s guided range of 22-24 cents.

Reported earnings came in at 45 cents per share in the quarter, compared with net 9 cents in the year-ago quarter.

Revenues

Total revenues were down 1.3% year over year to $194 million in the quarter under review. The figure however outpaced the Zacks Consensus Estimate of $189 million and was above the company’s guidance of $187-$189 million. The year-over-year decline was however caused by a fall in Hereditary cancer testing revenues owing to price reductions in long-term contracts.

However, the decline was partially offset by growing new product volumes, expanded reimbursement for new products and increase in international RNA kit revenues. Moreover, this was the fourth consecutive quarter where the company witnessed year-over-year Hereditary cancer volume growth led by encouraging response to the newly launched riskScore test under its myRisk Hereditary Cancer testing portfolio.

Quarter in Details

Segment-wise, Molecular diagnostic tests (92.4% of total revenue) recorded total revenues of $179.2 million, down 2.6% year over year on account of a 11.8% decline in Hereditary cancer testing revenuesto $126.9 million. EndoPredict testing revenues grew 25% year over year to $2 million in the reported quarter. Moreover, Vectra DA testing revenues came in at $11.1 million, up 3.7% year over year, while other testing revenues declined 13.9% to $2.5 million.

In the Prolaris testing space, volumes maintained double-digit growth in the fiscal first quarter,as well as an increase in average selling price that benefited from the Medicare favorable intermediate LCD, which was put to effect on Sep 25, 2017. Prolaris tests raked in revenues of $5 million in the quarter, up 61.3%. Also, Hereditary Cancer testing revenues declined due to price reductions in the long-term contracts. However, volume growth exceeded the company’s 3% growth target on a year-over-year basis.

Pharmaceutical and clinical service revenues (accounting for the rest) in the quarter totaled $14.8 million, reflecting a year-over-year increase of 17.5%.

Margin Trends

Gross margin in the quarter under review contracted 30 basis points (bps) to 77.1%. According to management, the gross margin performance was affected by Hereditary Cancer test pricing issue, partially offset by improved efficiencies in Hereditary Cancer production process as a result of the Elevate 2020 initiatives and increasing new product reimbursement.

Operating expenses decreased 4.8% to $132 million as a 4.1% rise in selling, general and administrative (SG&A) expenses (to $115.4 million) was offset by a 9.7% slash in research and development (R&D) expenses 9to $16.8 million) in the reported quarter.

Financial Position

Myriad Genetics exited the fiscal second quarter with cash, cash equivalents and marketable securities of $143.5 million, compared with $148.3 million at the end of the preceding quarter. Year to date, cash flow from operations totaled $56.5 million, compared with $28.5 million in the year-ago period. Year-to-date the company registered free cash flow of $54.5 million, compared with $22.7 million in the year-ago period.

Guidance

Myriad Genetics has raised the guidance for fiscal 2018 revenues to $760-$770 million from $750-$770 million provided earlier. The Zacks Consensus Estimate of $766.2 million lies within the guided range.

On the bottom-line front, the company lifted the adjusted EPS range to $1.11-$1.16 from the previous $1.00-$1.05. The current Zacks Consensus Estimate of $1.06 is below the company’s guided range.

Management has provided the guidance for the third quarter of fiscal 2018. The company estimates adjusted earnings per share of 26-28 cents on total revenues of $186-$188 million. The Zacks Consensus Estimate for adjusted EPS is 26 cents and revenues is $191.6 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter.

Myriad Genetics, Inc. Price and Consensus

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

VGM Scores

At this time, MYGN has an average Growth Score of C. However, its Momentum is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for value and to a lesser degree growth.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. Notably, MYGN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.