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Exact Sciences Drops on Earnings Loss, Lack of Visibility

Exact Sciences swung to a large fourth quarter loss due in part to its purchase of Base Genomics in the period.
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Shares of Exact Sciences  (EXAS) - Get Exact Sciences Corporation Report dropped Wednesday despite topping analysts' fourth-quarter revenue expectations as earnings swung to a large net loss and analysts digested the quarter. 

Investors were also reacting to management commentary suggesting that first-quarter results are likely to disappoint. 

Exact shares were down 7.2% to $143.14 in afternoon trading Wednesday after the company reported results after the market closed on Tuesday.

Evercore analyst Vijay Kumar maintained his outperform rating on the stock, according to Bloomberg, but said the company's commentary around quarter-to-quarter seasonality suggests first-quarter screening revenue will be around $235 million, which is below Wall Street estimates. Kumar also noted that Exact Sciences failed to give revenue guidance for 2021.

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But he added that despite the lack of visibility, it's tough to argue against the stock's expansion thesis as it's up more than 50% over the past 12 months. 

Meanwhile, Jefferies analyst Brandon Couillard also maintained his buy rating saying "1Q guidance color may disappoint, but likely conservative," according to Bloomberg, as management expects first-quarter screening revenue to be down slightly more than 4% quarter-to-quarter due mainly to a spike in COVID cases in December and January. 

“Bears will likely point to negative optics of a weak 1Q Cologuard [revenue] guide and substantially higher investment spending in ‘21,” Couillard said, according to Bloomberg.

For the fourth quarter, the healthcare diagnostics company reported $466 million in revenue, which was a nearly 60% increase year-over-year and ahead of analyst estimates of $446 million. However, the company also swung to a net loss of $437 million, due in part to a nearly $413 million research and development charge the company booked following its acquisition of cancer diagnostics developer Base Genomics. On a per share basis, that was a loss of $2.79, compared to consensus estimates of a loss of 19 cents, according to FactSet.

"We are a leader in cancer diagnostics because of our people, scientific platform, and market-leading Cologuard and Oncotype tests," CEO Kevin Conroy said. "We aim to extend this leadership throughout the cancer continuum and bring additional tests to patients to help improve cancer outcomes."