Accuray Incorporated ARAY is well-poised for growth in the coming quarters, courtesy of continued robust demand for its products. The optimism, led by robust global performance in the third quarter of fiscal 2025 and potential in the Radiosurgery Market, is expected to contribute further. However, reimbursement uncertainties and challenges related to tariff impacts are concerning.
This Zacks Rank #3 (Hold) company has lost 19.7% in the past year compared with a 6.8% decline in the industry. The S&P 500 has witnessed a 0.5% decline in the said time frame.
The renowned radiation oncology company has a market capitalization of $171 million. Accuray predicts 106.3% growth for fiscal 2025 and anticipates maintaining its strong performance going forward. The company has a P/S ratio of 0.4X compared with the industry’s 2.7X.
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Reasons Favoring Accuray’s Growth
Strength in CyberKnife System: Accuray’s CyberKnife System is a robotic radiosurgery platform designed to treat tumors throughout the body, supported by over two decades of clinical evidence. It is especially effective for diseases located in the head, skull base, and spine. Its precision, supported by Synchrony real-time tumor tracking and ClearRT high-quality imaging, makes it suitable for treating cancers, benign tumors, and functional diseases. The system's strong clinical reputation was further reinforced by a recent study published in the International Journal of Cancer, which highlighted its effectiveness and efficiency in treating brain stem metastases.
In the fiscal second quarter, CyberKnife delivered more than 50% year-over-year revenue growth, significantly outpacing market trends. This growth was driven by increasing global adoption, particularly in China and Japan, where demand for advanced, precise treatment options is high. Recent regulatory approvals for the CyberKnife S7 system in China have further strengthened its presence in the Type A premium segment, positioning it as a leading solution in the radiosurgery market.
Solid Product Demand Driving Growth: Accuray’s third-quarter fiscal 2025 results reflect strong, sustained demand for its advanced radiation therapy systems, driving a 12% year-over-year increase in total net revenues to $113.2 million and a 16% rise in product revenue to $57 million, fueled by a 23% increase in unit sales. Robust demand across developed and emerging markets, a diverse product portfolio, and a strong book-to-bill ratio above 1.2x signal healthy future revenue visibility. With a $452 million backlog and no order cancelations, customer confidence remains high, supported by both new acquisitions and replacements of aging equipment (35% of orders). Management highlighted that product revenue growth is outpacing the market, while the service segment, which contributes nearly half of total revenues and bolsters margins, ensures balanced and sustainable growth.
Solid Q3 Results: Accuray’s third-quarter fiscal 2025 earnings and revenues beat their respective estimates. Per the third-quarter earnings call, Accuray's growth was primarily driven by strong revenue growth, supported by robust demand across both developed and emerging markets. An increase in product revenue, attributed to a 23% rise in unit volume and strong uptake of their expanded product portfolio, along with growth in service revenue, played key roles.
The company achieved a healthy book-to-bill ratio of over 1.2x, with 35% of orders from equipment replacements and the rest from capacity expansions, indicating sustainable customer demand. Operational improvements, effective pricing strategies, and a focus on working capital efficiency also contributed to profitability.
Factors That May Offset the Gains for ARAY
Tariffs Pose Significant Near-Term Risk: Accuray is likely to face material near-term headwinds due to recently imposed tariffs impacting its product shipments to China. Despite robust demand in the region, management expects minimal shipments to China in the fourth quarter, citing an estimated revenue impact of $10–$15 million. While the company is actively pursuing mitigation strategies, the uncertainty and timing around these efforts remain unresolved. Services revenue is more insulated from tariff effects, but product revenue is likely to take a hit.
Though Accuray maintained its FY25 adjusted EBITDA guidance, this outlook depends heavily on offsetting China losses with contributions from other regions. The volatility surrounding trade policy, combined with constrained visibility into Chinese operations, introduces downside risk to both revenue growth and margin stability in the short term.
Reimbursement Uncertainties: ARAY’s customers rely significantly on reimbursement from public and private third-party payors for procedures using the CyberKnife and TomoTherapy platforms. The company’s ability to successfully commercialize its products and increase market acceptance will significantly depend on the extent to which public and private third-party payors provide adequate coverage and reimbursement for these procedures. These procedures are performed using its products.
This also depends on the extent to which patients treated using its products continue to be covered by health insurance. Third-party payors may establish or change the reimbursement for medical products and services that could significantly influence the purchase.
ARAY’s Estimate Trend
Accuray has been witnessing a stable estimate revision trend for fiscal 2025. Over the past 30 days, the Zacks Consensus Estimate for earnings has remained stable at 1 cent per share.
The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $124.5 million, indicating a 7.3% decline from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space that have announced quarterly results are CVS Health Corporation CVS, Integer Holdings Corporation ITGR and Boston Scientific Corporation BSX.
CVS Health, carrying a Zacks Rank of 2 (Buy), reported first-quarter 2025 adjusted earnings per share (EPS) of $2.25, beating the Zacks Consensus Estimate by 31.6%. Revenues of $94.59 billion outpaced the consensus mark by 1.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CVS Health has a long-term estimated growth rate of 11.4%. CVS’s earnings surpassed estimates in each of the trailing four quarters, with an average surprise of 18.1%.
Integer Holdings reported first-quarter 2025 adjusted EPS of $1.31, beating the Zacks Consensus Estimate by 3.2%. Revenues of $437.4 million surpassed the Zacks Consensus Estimate by 1.3%. It currently sports a Zacks Rank #1.
Integer Holdings has a long-term estimated growth rate of 18.4%. ITGR’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 2.8%.
Boston Scientific reported first-quarter 2025 adjusted EPS of 75 cents, beating the Zacks Consensus Estimate by 11.9%. Revenues of $4.66 billion surpassed the Zacks Consensus Estimate by 2.3%. It currently carries a Zacks Rank #2.
Boston Scientific has a long-term estimated growth rate of 13.3%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.8%.
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