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DexCom (DXCM) Beats on Q1 Earnings, Hikes '19 Guidance

Zacks Equity Research

DexCom, Inc. DXCM reported adjusted loss of 5 cents per share in the first quarter of 2019, significantly narrower than the Zacks Consensus Estimate of a loss of 17 cents per share. Further, the figure was narrower than the year-ago quarter’s loss of 32 cents per share.
 

Total revenues surged 52.1% to $280.5 million on a year-over-year basis and also surpassed the Zacks Consensus Estimate by 14%. Rising volumes across all channels along with the increasing global awareness of the benefits of real-time CGM contributed to the upside.
 

Segmental Details
 

Revenues at the Sensor segment (76% of total revenues) surged 60.7% on a year-over-year basis to $211.9 million. Transmitter revenues (18%) increased 31.6% year over year to $49.6 million. Receiver revenues (7%) improved 28.4% year over year to $19 million.
 

Geographical Details
 

U.S. revenues (75% of total revenues) surged 44.8% on a year-over-year basis to $210.5 million. International revenues (25%) soared 79.5% year over year to $70 million.

DexCom, Inc. Price, Consensus and EPS Surprise

 

DexCom, Inc. Price, Consensus and EPS Surprise | DexCom, Inc. Quote

Margin Analysis
 

Gross profit in the quarter under review totaled $168.8 million, up 41.9% year over year. However, DexCom generated gross margin (as a percentage of revenues) of 60.2%, which contracted 430 bps year over year. 
 

Research and development (R&D) expenses amounted to $59 million in the quarter, up 31.7% year over year. Selling, general and administrative expenses totaled $124.2 million in the reported quarter, up 18.5% year over year.
 

The company reported total operating expenses of $183.2 million, up 22.5% year over year. As a percentage of revenues, DexCom generated operating margin of 34.6% in the first quarter.
 

Financial Position
 

As of Mar 31, 2019, DexCom had $1.36 billion in cash and marketable securities.
 

Total cash and cash equivalents came in at $1.29 billion, up 13% from 2018-end level.
 

Guidance Raised
 

DexCom now expects revenues in the range of $1.25-$1.3 billion (up from the previously guided range of $1.18-$1.23 billion). The Zacks Consensus Estimate for revenues is currently pegged at $1.23 billion, which is below the lower end of the guided range.
 

Gross profit margin is projected to be 64% to 65% of net revenues.
 

While adjusted operating margin is expected to be about 6% of net revenues, adjusted EBITDA margin is anticipated to be 18%.
 

Wrapping Up
 

DexCom exited the first quarter on a strong note, wherein both the top and bottom line beat the Zacks Consensus Estimate. Impressive contributions from the Sensor, Transmitter and Receiver segments were key catalysts. A strong guidance also instills investors’ optimism in the stock.
 

Additionally, the glucose monitoring market presents significant commercial opportunity for this company. DexCom’s opportunities in alternative markets such as the non-intensive diabetes management space, the hospital, gestational, pre-diabetes and obesity are likely to provide it a competitive edge in the MedTech space.
 

Aided by the solid performance, DexCom has commenced 2019 on a good note and is optimistic about the future results. The company’s growth is a testament to the increasing awareness and excitement revolving real-time CGM and DexCom’s new G6 technology.
 

Meanwhile, cutthroat competition in the market for blood & glucose monitoring devices is worrisome. We believe that the company’s margins will continue to remain under pressure in the upcoming quarters due to high product development costs and rising expenditures on the R&D front.
 

Zacks Rank
 

Currently, DexCom carries a Zacks Rank of 3 (Hold).
 

Earnings of MedTech Majors at a Glance
 

Some better-ranked stocks which posted solid results this earning season are Stryker Corporation SYK, Abbott Laboratories ABT and CONMED Corporation CNMD, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Stryker delivered first-quarter 2019 adjusted earnings per share of $1.88, beating the Zacks Consensus Estimate by 2.2%. Revenues of $3.52 billion were in line with the Zacks Consensus Estimate.

 

Abbott reported first-quarter 2019 adjusted earnings of 63 cents per share, beating the Zacks Consensus Estimate by 3.3%. First-quarter worldwide sales came in at $7.54 billion, above the Zacks Consensus Estimate of $7.47 billion.
 

CONMED reported first-quarter 2019 adjusted earnings per share of 57 cents, which beat the Zacks Consensus Estimate of 54 cents. Revenues were $218.4 million, surpassing the Zacks Consensus Estimate of $213 million.
 

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Abbott Laboratories (ABT) : Free Stock Analysis Report
 
Stryker Corporation (SYK) : Free Stock Analysis Report
 
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CONMED Corporation (CNMD) : Free Stock Analysis Report
 
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