Exact Sciences Q2 Earnings Surpass Expectation, But Analyst Says Stock Has Limited Growth

Exact Sciences Corp EXAS reported Q2 revenue of $622 million, an increase of 19%, and $617 million of core revenue, an increase of 24%, beating the consensus of $599.03 million.

Screening revenue was $462.8 million, an increase of 31%. Precision Oncology revenue was $157.2 million, an increase of 2% or 7% on a core revenue basis.

Exact Sciences reported a Q2 EPS loss of $(0.45), down from $(0.94) a year ago and the consensus of $(0.50).

Guidance: The company raised 2023 revenue guidance to $2.441-$2.466 billion, up from the previously expected range of $2.380-$2.420 billion and consensus of $2.42 billion.

The updated guidance includes Screening revenue of $1.820-$1.835 billion (prior $1.770-$1.795 billion), Precision Oncology revenue of $615-$625 million ($605-$620 million), and COVID-19 testing revenue of $6 million ($5 million).

Benchmark analyst Bruce Jackson says Exact Sciences delivered impressive results for Q2 and increased its forecast for the rest of the year. 

Despite enhanced revenue predictions, the stock has limited potential for further growth. Consequently, due to valuation considerations, the analyst downgraded the rating to 'Hold.'

The analyst notes that the company's flagship product, Cologuard, continues to gain momentum following Q1 and foresees this trend to persist. 

In the longer term, the new product initiatives for MRD, MCED, and a CRC blood test appear promising and could become significant revenue contributors by 2025. 

William Blair analysts Andrew Brackmann, Dustin Scaringe, and Maggie Boeye write that Exact Sciences once again surpassed guidance and raised its outlook significantly, but some investors may have anticipated a bigger beat.

The Cologuard franchise continues to demonstrate robust momentum. Moreover, adjusted EBITDA and free cash flow have taken a positive turn, and there's no sign of the profitability narrative slowing down. Consequently, given that the valuation is considered reasonable at seven times the analysts' updated 2024 figures, they maintain Outperform rating.

Price Action: EXAS shares are down 10.1% at $86.68 on the last check Wednesday.