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DexCom (DXCM) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

DexCom, Inc.’s DXCM first-quarter 2019 results are scheduled to release on May 1, after market close. While the company’s solid sensor volumes are expected to drive to-be-reported quarter results, stiff competition in the glucose monitoring space is concerning.

Notably, the company has average earnings surprise of 132.3% for the trailing four quarters.

Let’s see how things are shaping up prior to the earnings release.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for first-quarter is pegged at a loss of 17 cents. The same for revenues is pinned at $246.5 million, suggesting a 33.7% improvement year over year.

Sensor Segment to Boost Results

DexCom's unique sensor technology has lent it a competitive edge in the MedTech space.

The company is expected to gain from strong demand for the G6 sensors. In fact, these sensors are likely to rake in huge profits for the quarter to be reported. By late 2018, management at DexCom had announced that the G6 system is available in 14 countries and the company has continued to roll it out globally since then. Meanwhile, DexCom’s Insulet and Lilly diabetes management products continue to progress well.

Additionally, the acquisition of TypeZero in the recent past has helped solidify the company’s product pipeline, which might drive results in the quarter to be reported.

The Zacks Consensus Estimate for the segment’s first-quarter revenues stands at $203 million, suggesting a significant 53.8% rise year over year.

DexCom, Inc. Price and EPS Surprise

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

Other Factors to Consider

DexCom has collaborative agreements with companies, which should not only bring in milestone payments and royalties but should also help expand its products’ use.

The amendment of the collaboration with Verily last November is expected to help DexCom fortify its foothold in the Type 2 diabetes space. DexCom’s smart pen and integration program with Novo Nordisk continues to expand, with a view to provide enhanced continuous glucose monitoring to patients.

We expect this trend to positively impact first-quarter results.

However, management at DexCom expects to incur roughly $25 million of restructuring charges in the first half of 2019 for a corporate initiative. Though the expense will be excluded from the adjusted financial results, it might impact earnings in the quarter to be reported.

Moreover, the market for blood glucose monitoring devices is highly competitive, subject to rapid change and significantly affected by product introductions. DexCom competes directly with Roche Diabetes Care — a division of Roche Diagnostics; LifeScan, Inc. — a division of Johnson & Johnson; and the MediSense and TheraSense divisions of Abbott Laboratories.

What Does Our Model Say?

Our proven model shows that a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to deliver a positive earnings surprise. This is not the case here.

Earnings ESP: DexCom has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DexCom carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Worth a Look

Here are a few stocks from the broader medical space that are likely to post an earnings beat this season.

Cardinal Health CAH has an Earnings ESP of +1.13% and a Zacks Rank #3.

Medidata Solutions MDSO has an Earnings ESP of +12.31% and a Zacks Rank #3.

LHC Group LHCG has an Earnings ESP of +0.56% and a Zacks Rank #3.

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