We recently reiterated our ‘Neutral’ rating on Accuray Incorporated (ARAY) with a target price of $6.75 based on a P/E of 33.8x our fiscal 2011 EPS estimate of 20 cents. The company’s results for the third quarter fiscal 2010 were mixed.
Earnings per share of 4 cents were considerably higher than the Zacks Consensus Estimate of 1 cent. However, earnings were lower than 5 cents, compared with a year-ago.
Total revenues in the third quarter declined 15.3% year over year to $51.9 million. Lower revenues were due to decreased demand for the company’s CyberKnife Robotic Radiosurgery Systems. The company installed six new systems in the third quarter, versus eleven in the prior quarter. Furthermore, Accuray bagged fourteen orders for its CyberKnife Robotic Radiosurgery Systems in the third quarter, compared with eighteen in the prior quarter.
Product revenues slashed 17.6% year over year to roughly $33.8 million. Services revenues fell 2.0% year over year to $17.5 million.
Gross margin dropped 60 basis points (bps) year over year to 48.9%. However, lower operating expenses helped Accuray improve its operating and net margins. Both operating and net margins increased 390 bps and 240 bps year over year to 5.3% and 4.4%, respectively.
Headquartered in Sunnyvale, California, Accuray designs, develops and sells the CyberKnife System, an image-guided robotic radiosurgery system used for the treatment of solid tumors. The CyberKnife System is the first and only commercially available intelligent robotic radiosurgery system designed to treat solid tumors anywhere in the body. This is an alternative to traditional surgery.
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