Inspire (INSP) Up 16.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Inspire Medical Systems (INSP). Shares have added about 16.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Inspire due for a pullback? 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 drivers.
Inspire Medical Q3 Earnings Top Estimates, Revenues Lag
Inspire Medical delivered a loss of 29 cents per share in third-quarter 2023, narrower than the year-ago loss of 60 cents. The metric was also narrower than the Zacks Consensus Estimate of a loss of 53 cents.
Revenues in Detail
Inspire Medical registered revenues of $153.3 million in the third quarter, up 40.4% year over year. However, the figure lagged the Zacks Consensus Estimate by 1.8%.
Per management, the top-line growth was driven by higher utilization at existing sites. The addition of new implanting centers and U.S. sales territories also complimented the improvement. The top line also benefited from strength in U.S. revenues and revenues outside the United States (All other countries).
Segment Details
Inspire Medical’s operations consist of two geographic regions — the United States and All other countries.
For the quarter under review, U.S. revenues of $147.5 million reflected an increase of 38.8% from the year-ago quarter on a reported basis. Per management, this upside was primarily driven by higher utilization at existing centers. Other growth drivers included the addition of new implanting centers, Inspire Medical’s continuing direct-to-consumer marketing and a higher number of territory managers.
During the reported quarter, Inspire Medical activated 62 new U.S. centers, thus bringing the total to 1,107 U.S. medical centers providing Inspire therapy. The company also created 13 new U.S. sales territories in the quarter, bringing the total to 274 U.S. sales territories.
Revenues from outside the United States totaled $5.8 million, up 99% year over year on a reported basis.
Margin Analysis
In the third quarter, Inspire Medical’s gross profit increased 44.2% to $128.9 million. The gross margin expanded 222 basis points to 84.1%.
SG&A expenses jumped 32.3% to $113.2 million. R&D expenses increased 38.8% year over year to $29.1 million. Operating expenses of $142.4 million increased 33.6% year over year.
Operating loss totaled $13.5 million compared with the prior-year quarter’s operating loss of $17.2 million.
Financial Position
Inspire Medical exited third-quarter 2023 with cash and cash equivalents and short-term investments of $464.2 million compared with $467.1 million at the second-quarter end.
Cumulative net cash provided by operating activities at the end of third-quarter 2023 was $7.4 million against cumulative net cash used in operating activities of $7.7 million a year ago.
Outlook
Inspire Medical has upped its revenue outlook for 2023.
The company now projects revenues in the range of $608 million-$612 million (reflecting growth of 49-50% from 2022 levels), up from the earlier projection of $600 million-$610 million (reflecting growth of 47-50% from 2022 levels). The Zacks Consensus Estimate is pegged at $612.3 million.
Inspire Medical continues to plan to activate 52-56 new U.S. medical centers providing Inspire therapy and add 12-14 new U.S. sales territories during the fourth quarter of 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Inspire has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Inspire has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Inspire is part of the Zacks Medical Info Systems industry. Over the past month, Omnicell (OMCL), a stock from the same industry, has gained 9.2%. The company reported its results for the quarter ended September 2023 more than a month ago.
Omnicell reported revenues of $298.66 million in the last reported quarter, representing a year-over-year change of -14.2%. EPS of $0.62 for the same period compares with $1 a year ago.
For the current quarter, Omnicell is expected to post earnings of $0.17 per share, indicating a change of -48.5% from the year-ago quarter. The Zacks Consensus Estimate has changed -116.7% over the last 30 days.
Omnicell has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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