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Can Molecular Diagnostics Drive Myriad's (MYGN) Q1 Earnings?

Myriad Genetics, Inc. MYGN is scheduled to report first-quarter fiscal 2018 results on Nov 7, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 15.4%. Moreover, Myriad Genetics beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 6.2%.

Let’s take a look at how things are shaping up prior to this announcement.

Key Catalysts

Similar to last quarter, Myriad Genetics is expected to gain from strong Molecular Diagnostics performance led by solid contributions from the GeneSight and EndoPredict tests. The Zacks Consensus Estimate for Molecular Diagnostics revenues of $170 million reflects an increase of 3% from the year-ago quarter.

We are also upbeat about management’s expectations of double-digit volume growth in fiscal 2018 for GeneSight, Vectra DA, Prolaris and EndoPredict revenues, all of which make up most of the Molecular Diagnostics portfolio.

 

Myriad Genetics, Inc. Price and EPS Surprise

 

Per the company, the GeneSight test represents significant opportunities. As GeneSight is in the initial stages of adoption and is placed in a highly under-penetrated preventive care market, the product has huge growth potential. Management expects consistent growth in GeneSight test revenues in the quarters ahead. The Zacks Consensus Estimate for GeneSight test of $26.1 million reflects an increase of 263.9% from the year-ago quarter and 2.4% sequentially.

In March, the company  launched  the EndoPredict test in the United States for patients with early-stage breast cancer and since then has received encouraging response for it. In August, Myriad Genetics received positive coverage decision for the test from Palmetto GBA, a Medicare Administrative Contractor (MAC) and Anthem, Inc., one of the largest private insurers in the United States. Notably, full implementation of this decision will lend Myriad Genetics coverage for approximately 90% of breast cancer patients.

The company recently announced positive results from a clinical study evaluating EndoPredict which highlights its superiority over the first-generation Oncotype DX Breast Recurrence Score in predicting breast cancer recurrence in women determined to be at intermediate clinical risk by the Nottingham Prognostic Index. The Zacks Consensus Estimate for GeneSight test of $2.3 million reflects an increase of 35.3% from the year-ago quarter.

Here are the other factors that might influence Myriad Genetics’ first-quarter results:

Management seemed upbeat about the prospects of the Prolaris test. In May, the company announced the receipt of a positive final Local Coverage Determination (LCD) to expand Medicare coverage of the Prolaris test by Palmetto GBA, a MAC.

Again, in May, the company announced plans of showcasing data demonstrating the utility of the Prolaristest in efficiently predicting the 10-year risk of metastases in men treated for prostate cancer at the American Urological Association (AUA) 2017 Annual Meeting. These positive flow of news are expected to to boost the top line in the to-be-reported quarter. The Zacks Consensus Estimate for Prolaris test revenues of $3.3 million reflects an increase of 13.8% from the year-ago quarter.

Management estimates adjusted earnings per share of 19-21 cents on total revenue of $181-$183 million for the first quarter of fiscal 2018 . The Zacks Consensus Estimate for adjusted earnings of 21 cents and revenues of $182 million is within the company’s guided range.

On the flip side, unfavorable foreign currency translation continues to pose a threat. With a considerable portion of its revenues coming from outside the United States, the company faces the risk of exchange rate fluctuations. Additionally, macroeconomic uncertainty and higher expenses owing to extensive pipeline of some testsmay impact the company’s margins.

Here is what our quantitative model predicts:

Our proven model shows that Myriad Genetics is likely to beat earnings because it has the perfect combination of two key ingredients.

Zacks ESP:  Myriad Genetics has an Earnings ESP of +1.04%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our https://www.zacks.com/premium/esp-buy?adid=zp_article_espfil...">Earnings ESP Filter.

Zacks Rank: Myriad Genetics currently carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

The combination of Myriad Genetics’ Zacks Rank #2 and +1.04% ESP makes us reasonably confident of an earnings beat.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

The Cooper Companies, Inc. COO has an Earnings ESP of +0.24% and a Zacks Rank #2. You can see https://www.zacks.com/stocks/buy-list/?ADID=zp_1link_invidea...">the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. HSIC has an Earnings ESP of +1.00% and a Zacks Rank #3.

Penumbra, Inc. PEN has an Earnings ESP of +31.82% and a Zacks Rank #3.

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