Can Molecular Diagnostics Drive Myriad's (MYGN) Q3 Earnings?

Myriad Genetics, Inc. (NASDAQ:MYGN) is scheduled to report third-quarter fiscal 2018 results on May 8, after the closing bell.

Last quarter, the company posted a positive earnings surprise of 29.2%. Moreover, Myriad Genetics beat the Zacks Consensus Estimate in the trailing four quarters, the average being 20.2%.

Let’s take a look at how things are shaping up prior to this announcement.

Factors Influencing Q3 Results

Similar to last quarter, Myriad Genetics is expected to gain from strong Molecular Diagnostics performance, led by solid contributions from the GeneSight, EndoPredict and Prolaris tests.

Per the company, the GeneSight test represents significant opportunities. As GeneSight is placed in a highly under-penetrated preventive care market, the product has huge growth potential. Management expects consistent growth in GeneSight test revenues in the quarters ahead.

Myriad Genetics, Inc. Price and EPS Surprise

We also encouragingly note that, over the last few months, Myriad Genetics has been making encouraging progress with the EndoPredict test. During the second quarter of fiscal 2018, the company announced the finalization of LCD from Noridian for EndoPredict, thereby expanding the total coverage to around 90% of the U.S. market.

Further, in fiscal 2017, the company received reimbursement approval for EndoPredict in France, Quebec and in some additional German sites. Moreover, according to Myriad Genetics, EndoPredict presents a global market opportunity of more than $600 million annually, with high demand in countries like Canada and the United States.

Further, management’s expectations of double-digit volume growth in fiscal 2018 for GeneSight, Vectra DA and Prolaris, all of these make up the chunk of the Molecular Diagnostics portfolio, buoys optimism.

The Prolaris testing volumes grew double digits in the last reported quarter as well. We are also encouraged by the company’s receipt of a positive final Local Coverage Determination to expand Medicare coverage of the Prolaris test from Palmetto GBA in the first half of 2017. Moreover, management seems upbeat about the prospects of the Prolaris test as it represents a global market opportunity of approximately $1.5 billion annually.

We expect Myriad Genetics to continue to witness year-over-year growth in Hereditary Cancer volumes. Moreover, the last reported quarter was the fourth consecutive quarter, where the volume growth was led by encouraging response to the newly launched riskScore test under its myRisk Hereditary Cancer testing portfolio.

Management believes that the company is well-positioned in the breast cancer testing space for fiscal 2018, courtesy of encouraging Hereditary cancer volumes on steady growth and predictable long-term pricing. Thus, we believe the company is positioned to cash in on the huge potential in the breast cancer screening market.

On the flip side, unfavorable foreign currency translation continues to pose threat. With a considerable portion of revenues coming from outside the United States, the company faces the risk of exchange rate fluctuations. Additionally, macroeconomic uncertainty and higher expenses owing to lengthy pipeline approvals might dent margins.

Further, the Zacks Consensus Estimate for fiscal third-quarter revenues of $188 million reflects a decline of 4.5% from the year-ago quarter.

Earnings Whispers

Our proven model does not conclusively show that Myriad Genetics is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Myriad Genetics has an Earnings ESP of 0.00%.

Zacks Rank: Myriad Genetics carries a Zacks Rank #2, which increases the predictive power of ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Zacks Consensus Estimate for third-quarter 2018 adjusted earnings of 27 cents was on par with the year-ago quarter.

Stocks Worth a Look

Here are a few stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.

Brady Corporation (NYSE:BRC) has an Earnings ESP of +1.03% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank Stocks Here.

Michael Kors Holdings Limited (NYSE:KORS) has an Earnings ESP of +6.82% and a Zacks Rank #2.

Zebra Technologies Corporation (NASDAQ:ZBRA) has an Earnings ESP of +0.28% and a Zacks Rank #3.

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