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Why Accuray Shares Are Soaring Today

By Keith Speights - Jan 29, 2020 at 11:35AM

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Investors liked the medical device maker's better-than-expected Q2 results.

What happened

Shares of Accuray (ARAY -2.97%) were soaring 15.6% higher as of 11:03 a.m. EST on Wednesday with investors liking what they saw with the medical device maker's fiscal 2020 second-quarter results. Accuray announced its Q2 results after the market closed on Tuesday.

The company reported revenue for the quarter of $98.8 million, down a little from the prior-year period but higher than analysts expected. Accuray also posted earnings of $10.7 million, or $0.12 per share, which was much better than the consensus Wall Street estimate of a net loss of $0.07 per share.

There was also good news with Accuray's full-year 2020 outlook. While the company maintained its full-year revenue guidance of between $410 million and $420 million, it boosted its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance. Accuray now expects full-year adjusted EBITDA of between $21 million and $26 million, higher than its previous projection of $19 million to $24 million.

Accuray Radixact medical device

Image source: Accuray.

So what

Perhaps the most important takeaway from Accuray's Q2 results is that they reinforce the impression among investors that the company is making a strong comeback from its dismal 2019 performance. Beating Wall Street estimates goes a long way in establishing confidence that Accuray is on the right track.

However, there's more to the story with the company's big earnings beat. Accuray's net income in Q2 included a $13 million gain related to its investment in a China joint venture. Without this gain, the company would have recorded a net loss in the second quarter.

Still, though, Accuray delivered a better-than-expected performance across the board in Q2. Its adjusted EBITDA, which excludes the impact of the one-time gain from the China joint venture, jumped to $7.1 million from $4.1 million in the prior-year period. That's the kind of progress that investors like to see. 

Now what

Probably the main thing to watch with Accuray now is how uncertainty in China impacts the company's sales. Some healthcare stocks could be very volatile with the threat of the coronavirus that originated in China becoming a pandemic. However, Accuray CEO Joshua Levine said that the concerns about the virus shouldn't impact the long-term demand for his company's radiation therapy products in China.

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