Exact Sciences Corporation (EXAS Quick QuoteEXAS - Free Report) is gaining from continued strength across the Screening and Precision Oncology businesses. The company’s earnings and revenues for the second quarter of 2022 surpassed the Zacks Consensus Estimate. The impressive Cologuard volume growth buoys optimism. A promising solvency position is an added advantage. However, mounting expenses and stiff competition do not bode well.

In the past year, this Zacks Rank #3 (Hold) stock has lost 64.6% compared with a 39.5% fall of the industry it belongs to and a 9.3% decline of the S&P 500 composite.

The renowned global medical device company has a market capitalization of $6.36 billion. Its net loss of 94 cents per share in the second quarter was narrower than the Zacks Consensus Estimate of a loss of $1.07.

The company’s long-term expected growth rate of 19.6% compares with the industry’s growth projection of 18.1% and the S&P 500’s estimated 11.2% increase.

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Let’s delve deeper.

Key Drivers

Q2 Upsides: Exact Sciences exited the second quarter of 2022 with better-than-expected results. The decline in quarterly loss compared to the year-ago period is encouraging. Robust revenues from the Screening and Precision Oncology segments contributed to the second-quarter top line. The legacy Screening business was driven by impressive Cologuard volume growth and contributions from the PreventionGenetics, Biomatrica and Oncoguard Liver products. The growing uptake of the Oncotype DX Breast and therapy selection products also instills optimism.

Advancing New Solutions: Exact Sciences is planning several key milestones to bring six innovative cancer diagnostics from its pipeline to patients in need. In this regard, the company made noteworthy progress in enrolling cases to power the prospective BLUE-C study in the second quarter. The results from the BLUE-C trial are anticipated to support FDA submissions for Cologuard 2.0-- the next-generation Cologuard and colon blood tests.

This month, Exact Sciences initiated a study with the West German Study Group to validate its tumor-informed ctDNA liquid biopsy test’s ability to identify minimum residual disease in hormone receptor (HR)-positive, HER2-negative early breast cancer patients.

Overall Strong Solvency: Exact Sciences exited the second quarter with cash and cash equivalents and marketable securities of $728 million. The company reported long-term debt of $50 million on its balance sheet at the end of second-quarter 2022, much lower than its current short-term cash level, indicating a good solvency position. This is good news, particularly during an overall tough macroeconomic scenario when the company is facing a global manufacturing and supply halt.

Downsides

Escalating Costs: In the second quarter, Exact Sciences’ sales and marketing expenses increased 10.8%, whereas general and administrative expenses rose 8.4% year over year, respectively. These mounting expenses pushed up adjusted operating costs by 7.5%, resulting in an adjusted operating loss in the quarter, weighing significantly on the company’s bottom line.

Persistent COVID-19 Impacts: The Screening and Precision Oncology businesses have been negatively impacted by the ongoing COVID-19 pandemic. The company expects any future COVID outbreaks to diminish access to healthcare provider offices. Further, pandemic-led cost inflation and supply-chain disruptions continue to impact the company’s operations.

Tough Competitive Landscape: Given the large market for colorectal cancer screening, Exact Science faces numerous competitors, some of which possess significantly greater financial and other resources and development capabilities than the company. The company is aware of at least 13 firms, including Epigenomics AG, EDP Biotech Corporation, etc., that have developed or are developing liquid biopsy tests for colorectal cancer detection.

Estimate Trend

In the past 90 days, the Zacks Consensus Estimate for Exact Sciences’ loss for 2022 has moved down to $4.22.

The Zacks Consensus Estimate for 2022 revenues is pegged at $2.01 billion, suggesting a 13.9% rise from the 2021 reported number.

Key Picks

A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN Quick QuoteAMN - Free Report) , Patterson Companies, Inc. (PDCO Quick QuotePDCO - Free Report) and McKesson Corporation (MCK Quick QuoteMCK - Free Report) .

AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has lost 5.8% against the industry’s 33.2% fall.

Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently flaunts a Zacks Rank #2 (Buy).

Patterson Companies has outperformed its industry in the past year. PDCO has lost 1.2% compared with the industry’s 10.3% fall in the past year.

McKesson has an estimated long-term growth rate of 9.9%. The company surpassed earnings estimates in the trailing three quarters and missed in one, delivering a surprise of 13%, on average. It currently carries a Zacks Rank #2.

McKesson has outperformed its industry in the past year. MCK has gained 81.8% against the industry’s 10.3% fall.