Here's Why You Should Retain Insulet (PODD) Stock for Now
Insulet Corporation PODD is likely to gain in the coming quarters, backed by the strength of its flagship offering, the Omnipod 5 Automated Insulin Delivery (“AID”) system. In the second quarter of 2023, Omnipod 5 made its first international launch in the United Kingdom. A strong solvent balance sheet further buoys investors’ optimism.
Meanwhile, inflationary pressures are likely to sustain throughout the year, affecting the company’s gross margins and net income. Economic uncertainties also remain a concern for Insulet.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 31.5% compared with the 2.9% fall of the industry and a 15.7% rise of the S&P 500 composite.
The developer, manufacturer and distributor of insulin delivery systems has a market capitalization of $12.36 billion. Insulet projects a long-term estimated earnings growth rate of 35.7% compared with 13.1% of the industry. PODD’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 126.94%.
Let’s delve deeper.
Upsides
Omnipod 5, a New Focus: Insulet’s revolutionary offering, Omnipod 5, is transforming diabetes management being the only FDA-approved fully disposable, pod-based automated insulin delivery system. It continues to be a driving force of strong U.S. growth, representing almost 95% of U.S. new customer starts in the second quarter of 2023.
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Meanwhile, the company has completed the commercial launch of Omnipod 5 in the United Kingdom and very recently in Germany. Omnipod 5 continues to have a very broad appeal and is attracting substantial new customer starts across all age groups.
Emphasis on Market Expansion & Operational Excellence: The company continues to drive growth with Omnipod DASH in international markets and the United States, especially in the type 2 diabetes market. This underpins Insulet’s efforts to grow the global addressable market as part of its four-pillar strategy.
Fueled by the success of Omnipod 5, the company received clearance for Omnipod GO in the United States, which should build on the type 2 leadership position. In June, PODD completed the 510(k) submission for the Omnipod 5 iOS app.
In addition, the availability of Omnipod through the U.S. pharmacy channel has made accessibility easier and more affordable by removing lengthy lock-in periods and high upfront costs. The company’s “pay-as-you-go” model has eliminated the risk for payers while delivering a superior and inexpensive experience for customers.
Favorable Solvency but Leveraged Balance Sheet: At the end of the second quarter of 2023, Insulet reported short-term payable debt of $29 million against the corresponding cash and cash equivalents of $660 million. This indicates a sound financial position.
Meanwhile, Insulet’s total debt-to-capital is 71.6%, representing a sequential decrease of 1.9%. However, times interest earned for the company is 5.7%, a huge increase from the first quarter’s 1.2%.
Downsides
Inflationary Concerns: Insulet is incurring higher costs associated with Omnipod 5 production. Added to this, higher production costs due to global inflation as well as supply-chain disruptions and labor shortages continue to put pressure on margins.
Economic Uncertainty Hampers Growth: Weaker global economic conditions may reduce the demand for Insulet’s products, intensify competition, exert pressure on prices, dent supply and lengthen the sales cycle. Insulet is also exposed to the risk of a reduction in healthcare spending in the United States, Canada and Europe due to an economic slump. We are particularly cautious as growth could moderate further if the economic scenario worsens.
For the next few years, management anticipates an unfavorable product mix, U.S. manufacturing ramp-up, inflation and supply-chain headwinds will continue to impact business results.
Estimate Trend
The Zacks Consensus Estimate for Insulet’s 2023 earnings per share (EPS) has moved up from $1.62 to $1.64 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $1.62 billion. This suggests a 24.4% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, SiBone SIBN and Quanterix QTRX.
Haemonetics has an earnings yield of 4.23% against the industry’s -1.33%. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 19.39%. Its shares have risen 17.3% against the industry’s 2.8% decline in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SiBone, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 22.9% compared with the industry’s 16.5%. Shares of the company have rallied 18.6% against the industry’s 0.6% decline over the past year.
SIBN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 20.37%.
Quanterix, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 62.8% for the current year compared with the industry’s 15.2%. Shares of QTRX have risen 182.1% against the industry’s 2.9% decline over the past year.
Quanterix’s earnings surpassed estimates in each of the trailing four quarters, delivering an average earnings surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
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