We maintain our Neutral recommendation on Accuray Incorporated (ARAY) following its fourth-quarter fiscal 2011 results, which beat the Zacks Consensus Estimates. The company, however, turned into a loss in the quarter as higher revenues were more than masked by hefty charges associated with its acquisition of rival TomoTherapy.
Sales spiked 22% year over year in the fourth quarter owing to record revenues of its CyberKnife robotic radiosurgery systems. The California-based company initiated its revenue forecast for fiscal 2012, which is expected between $400 million to $415 million.
Accuray is a global leader in the field of radiosurgery and provides a non-surgical treatment option for patients diagnosed with cancer. More than 200,000 people have been treated with the company’s technology globally. The company continues to enjoy healthy demand for its CyberKnife radiosurgery systemsand booked 19 orders for the device in the fourth quarter.
Accuray’s CyberKnife system boasts of a technology that differentiates it from traditional treatments. CyberKnife, a non-invasive alternative to conventional surgery,is the first and only commercially available intelligent robotic radiosurgery system designed to treat solid tumors anywhere in the body. The company is pursuing a number of strategies to boost CyberKnife’s adoption.
The acquisition of TomoTherapy has bolstered Accuray’s foothold in the radiation oncology space. The merger marks the union of TomoTherapy’s best-in-class radiation therapies and Accuray’s popular radiosurgery systems to create a leading player in this market. The company expects the transaction to be accretive to its earnings in fiscal 2012.
Accuray is expected to benefit from the gradual recovery in hospital capital equipment spending. However, the company remains susceptible to reimbursement uncertainties surrounding its products and its CyberKnife system faces stiff challenge from competitive product offerings of Varian Medical (VAR). We also account for the integration risks associated with the TomoTherapy acquisition.
ACCURAY INC (ARAY): Free Stock Analysis Report
VARIAN MEDICAL (VAR): Free Stock Analysis Report
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