It has been about a month since the last earnings report for DexCom (DXCM). Shares have lost about 11.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is DexCom due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
DexCom’s (DXCM) Q4 Earnings Beat, International Revenues Up
DexCom reported adjusted earnings of 54 cents per share in the fourth quarter of 2018, which outpaced the Zacks Consensus Estimate of 16 cents. The figure also improved from 10 cents registered in the year-ago quarter.
Total revenues rallied 53% to $338 million on a year-over-year basis and also surpassed the Zacks Consensus Estimate by 2.2%.
Revenues at the Sensor segment (75% of total revenues) surged 57% on a year-over-year basis to $252.8 million. Transmitter revenues (17%) increased 39% year over year to $59 million. Receiver revenues (8%) rallied 46% year over year to $26.3 million.
U.S. revenues (83% of total revenues) surged 50% on a year-over-year basis to $281 million. International revenues (17%) skyrocketed 72% year over year to $57 million.
Gross profit in the quarter under review totaled $222.8 million, up 45.1% year over year. However, DexCom generated gross margin (as a percentage of revenues) of 65.9%, which contracted 360 basis points (bps) year over year. Margins were under pressure due to an inventory change as well as shift toward OUS and Medicare.
Research and development (R&D) expenses amounted to $50.1 million in the quarter, up 15.7% year over year. Selling, general and administrative expenses totaled $104.6 million in the reported quarter, up 24.2% year over year.
The company reported adjusted operating expenses of $169.7 million, up 19.9% year over year. As a percentage of revenues, DexCom generated adjusted operating margin of 50.2% in the fourth quarter.
DexCom expects revenues in the range of $1.18-$1.23billion. The Zacks Consensus Estimate for revenues is currently pegged at $1.23billion, in line with the upper end of the guided range.
However, gross profit margin is projected to be 65% of net revenues.
While adjusted operating margin is expected to be 5.5% of net revenues, adjusted EBITDA margin is expected to be 18%.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -22.32% due to these changes.
At this time, DexCom has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
DexCom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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