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DexCom's (DXCM) Q4 Earnings Beat, International Revenues Up

Zacks Equity Research
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DexCom, Inc. DXCM 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%.

Segmental Details

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.

Geographical Details

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.

Margin Analysis

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%.

Wrapping Up

DexCom exited the fourth quarter on a strong note, beating the Zacks Consensus Estimate for earnings and revenues. Impressive contributions from the Sensor, Transmitter and Receiver segments were key catalysts. A strong guidance also instills investors’ optimism in the stock.

In addition, the glucose monitoring market presents significant commercial opportunity for this Zacks Rank #2 (Buy) 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.

On the flip side, 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. Lower expected margins on transmitter sales are added concerns.

Earnings of MedTech Majors at a Glance

Some other top-ranked MedTech stocks that posted solid quarterly results are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD.

Varian reported fiscal first-quarter adjusted EPS of $1.06, in line with the Zacks Consensus Estimate. Revenues of $741 million outpaced the consensus mark of $717.9 million. The stock has a Zacks Rank #2.

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, which surpassed the consensus estimate by 2.9%. The stock sports a ZacksRank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million exceeded the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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