Myriad Genetics Inc. MYGN reported adjusted earnings per share (EPS) of 41 cents in the third quarter of fiscal 2016, up 2.5% from the year-ago quarter. Adjusted EPS also surpassed the Zacks Consensus Estimate by 7.9% and exceeded the company’s guidance of 37–39 cents. A strong upside in revenues primarily drove the earnings growth.Myriad Genetics Inc. (MYGN) EPS BNRI & Surprise Percent - Last 5 Quarters | FindTheCompany Including one-time items, the company reported net income of $32.6 million or 44 cents per share in the reported quarter, reflecting a year-over-year improvement of 52.3% and 51.7%, respectively.Revenues Total revenue rose 5.8% year over year to $190.5 million, exceeding the company’s guidance of $183–$185 million. The top line also beat the Zacks Consensus Estimate of $186 million.The top-line growth was driven by strong sales from Myriad’s recent diagnostic assays, Vectra DA and Prolaris.Segment-wise, Molecular diagnostic tests (93.1% of total revenue) recorded total revenue of $177.4 million, up 2.5% year over year, primarily driven by Vectra DA testing revenues (up 17% at $12.3 million), Prolaris testing revenues (up 940% to $5.2m million) and other testing revenues (up 20% to $3.6 million). However Hereditary cancer testing revenues dropped 2% at $156.3 million.On the other hand, Pharmaceutical and clinical service revenues (accounting for the rest) in the third quarter grossed $13.1 million, reflecting solid year-over-year growth of 87%. Margin TrendsGross margin in the quarter contracted 80 basis points (bps) to 79%. According to management, this decline was primarily due to a change in product mix in Myriad’s low-margin pharmaceutical and clinical service business revenues. A decline in international gross margins in the third quarter, based upon increased sales at the low-margin EndoPredict business, compounded the overall margin decline.Operating expenses were almost flat at $107.7 million owing to 3% rise in research and development (R&D) expenses (to $17.2 million) and a 0.9% drop in selling, general and administrative (SG&A) expenses (to $90.5 million) in the reported quarter. Consequently, the operating margin improved 260 bps year over year to 22.4%.Financial PositionMyriad exited the third quarter of fiscal 2016 with cash, cash equivalents and marketable securities of $216.7 million, compared with $219.3 million at the end of the previous quarter. Year-to-date, cash flow from operations totaled $109.9 million, up 22.8% year over year. Consequently, free cash flow grossed $43.4 million compared with $25.4 million in the year-ago quarter.The company repurchased 1.2 million shares for $45 million during the quarter and was left with a buy-back authorization of $47 million.GuidanceMyriad has revised its revenue guidance for fiscal 2016. The company has narrowed its revenue guidance range to $753–$755 million, compared to the prior guidance of $750–$770 million. The Zacks Consensus Estimate of $758 million lies above the guided range.The company has also narrowed it adjusted EPS guidance for fiscal 2016 to the range of $1.63–$1.65 from the earlier $1.63–$1.68. The current Zacks Consensus Estimate of $1.66 is higher than Myriad's guidance.Alongside, management has provided its outlook for fourth-quarter fiscal 2016. The company estimates adjusted earnings per share at 36–38 cents on total revenue of $186–$188 million. The Zacks Consensus Estimate for adjusted EPS of 41 cents lies above the company’s guided range.Our ViewMyriad’s third quarter of fiscal 2016 has been quite satisfactory with both its top and bottom line comfortably beating the Zacks Consensus Estimate. Further, strong growth delivered by its recently launched Prolaris and Vectra DA as well as encouraging progress on private reimbursement coverage for these tests buoy optimism.Although the company observed a decline in its hereditary cancer testing business in the third quarter, Myriad continues to lead in the field of hereditary cancer and variant classification. Coming to its pipeline strategy (diversify revenues by commercializing four out of the six new product pipelines), the company is currently working on its five-year goal to develop six products beyond cancer, each of which will likely contribute over $50 million to total revenues.Zacks Rank & Key PicksCurrently, the company carries a Zacks Rank #3 (Hold). Better-ranked medical stocks are Baxter International Inc. BAX, SurModics, Inc. SRDX and Boston Scientific Corporation BSX. While Baxter and SurModics sport a Zacks Rank #1 (Strong Buy), Boston Scientific carries a Zacks Rank #2 (Buy).Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report BOSTON SCIENTIF (BSX): Free Stock Analysis Report BAXTER INTL (BAX): Free Stock Analysis Report SURMODICS (SRDX): Free Stock Analysis Report MYRIAD GENETICS (MYGN): Free Stock Analysis Report To read this article on Zacks.com click here.