Shares of Exact Sciences (NASDAQ:EXAS), a diagnostics company focused on colon cancer, dropped by 12% as of 12:30 p.m. EDT after the company announced its third-quarter earnings.
Exact Sciences had a strong quarter. Here's a look at a few of the highlights:
- The company completed roughly 68,000 Cologuard tests during the quarter, which was up 100% when compared to the year-ago quarter.
- Revenue grew by 123% year over year to $28.1 million. That beat out the $25.3 million Wall Street was expecting. Management credited the huge growth to the success of its sales and marketing campaigns.
- Net loss was $37.8 million, or $0.36 per share. That number was also better than the $0.42 loss analysts had projected.
- Cologuard's coverage continued to grow, and management said 144 million people can now access the product through their health plan.
- Exact Sciences ended the last quarter of 2016 with $337.8 million in cash thanks to a recently completed common stock offering that netted the company $144.2 million.
While these numbers looked great, the markets appear to be reacting harshly to the company's revised full-year guidance.
Management still believes approximately 240,000 Cologuard tests will be completed during the year. However, the company dialed back its top-line guidance. Management now expects revenue to land between $93 million and $95 million, which is at the low end of its prior guidance range of $90 million to $100 million.
Since the company just reported great quarterly results, this updated guidance is a bit of a head-scratcher. Traders clearly expected the company to raise its full-year guidance in response to the quarterly beat. The updated numbers could be causing some traders to worry that growth is going to slow in the fourth quarter, which is why shares are selling off today.
It's possible demand will slow in the fourth quarter, which wouldn't be great news. However, it's also possible that management is simply trying to keep a lid on investors' expectations so the company can once again report blowout numbers in the fourth quarter. After all, management previously stated that the total addressable market for Cologuard is $4 billion, so there's still plenty of room left for future growth. If that's true, the company's bulls might want to look at today's pullback as an opportunity to add to their positions.
Brian Feroldi has no position in any stocks mentioned. Like this article? Follow him on Twitter where he goes by the handle @Longtermmindset or connect with him on LinkedIn to see more articles like this.
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