Exact Sciences’s (NASDAQ:EXAS) Q4: Beats On Revenue

Diagnostic company Exact Sciences Corporation (NASDAQ:EXAS) announced better-than-expected revenue in Q4 CY2024, with sales up 10.3% year on year to $713.4 million. The company expects the full year’s revenue to be around $3.06 billion, close to analysts’ estimates. Its non-GAAP loss of $0.06 per share was 67.9% above analysts’ consensus estimates.

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“The Exact Sciences team is off to a good start in 2025, building on the momentum we created in the fourth quarter,” said Kevin Conroy, Chairman and CEO of Exact Sciences.

Company Overview

Founded in 1995, Exact Sciences Corporation (NASDAQ:EXAS) is a molecular diagnostics company focused on the early detection of cancers, offering innovative screening tests like Cologuard for colorectal cancer and Oncotype DX for various cancers.

Immuno-Oncology

Over the next few years, immuno-oncology companies, which harness the immune system to fight illnesses such as cancer, faces strong tailwinds from advancements in precision medicine (including the use of AI to improve hit rates) and growing demand for treatments targeting rare diseases. However, headwinds such as rising scrutiny over drug pricing, regulatory unknowns, and competition from larger, more resourced pharmaceutical companies could weigh on growth.

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Exact Sciences’s sales grew at an exceptional 25.8% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Exact Sciences’s annualized revenue growth of 15.1% over the last two years is below its five-year trend, but we still think the results were good and suggest demand was strong.

We can dig further into the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 15.3% year-on-year growth. Because this number aligns with its normal revenue growth, we can see Exact Sciences’s foreign exchange rates have been steady.

This quarter, Exact Sciences reported year-on-year revenue growth of 10.3%, and its $713.4 million of revenue exceeded Wall Street’s estimates by 1.6%.

Looking ahead, sell-side analysts expect revenue to grow 10.9% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is noteworthy and suggests the market is factoring in success for its products and services.

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Operating Margin

Exact Sciences’s high expenses have contributed to an average operating margin of negative 32.8% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Exact Sciences’s operating margin rose by 13.5 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming into its more recent performance, however, we can see the company’s margin has decreased by 9.5 percentage points on a two-year basis. If Exact Sciences wants to pass our bar, it must prove it can expand its profitability consistently.

Exact Sciences’s operating margin was negative 123% this quarter. The company's consistent lack of profits raise a flag.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Exact Sciences’s full-year earnings are still negative, it reduced its losses and improved its EPS by 6.9% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q4, Exact Sciences reported EPS at negative $0.06, up from negative $0.15 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Exact Sciences’s full-year EPS of negative $0.26 will reach break even.

Key Takeaways from Exact Sciences’s Q4 Results

We were impressed by how significantly Exact Sciences blew past analysts’ constant currency revenue expectations this quarter. We were also excited its adjusted EPS and EBITDA outperformed. On the other hand, its full-year EBITDA guidance missed. Overall, we think this was still a solid quarter with some key areas of upside. The market seemed to focus on the negatives, and the stock traded down 1.9% to $49.50 immediately after reporting.

Is Exact Sciences an attractive investment opportunity right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.