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Why Is DexCom (DXCM) Down 0.4% Since Last Earnings Report?

Zacks Equity Research
Annaly Capital Management (NLY) closed the most recent trading day at $9.30, moving +0.22% from the previous trading session.

It has been about a month since the last earnings report for DexCom (DXCM). Shares have lost about 0.4% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

DexCom Beats on Q1 Earnings, Hikes ‘19 Guidance 
 

DexCom, Inc. reported adjusted loss of 5 cents per share in the first quarter of 2019, significantly narrower than the Zacks Consensus Estimate of a loss of 17 cents per share. Further, the figure was narrower than the year-ago quarter’s loss of 32 cents per share.
 

Total revenues surged 52.1% to $280.5 million on a year-over-year basis and also surpassed the Zacks Consensus Estimate by 14%. Rising volumes across all channels along with the increasing global awareness of the benefits of real-time CGM contributed to the upside.
 

Segmental Details
 

Revenues at the Sensor segment (76% of total revenues) surged 60.7% on a year-over-year basis to $211.9 million. Transmitter revenues (18%) increased 31.6% year over year to $49.6 million. Receiver revenues (7%) improved 28.4% year over year to $19 million.
 

Geographical Details
 

U.S. revenues (75% of total revenues) surged 44.8% on a year-over-year basis to $210.5 million. International revenues (25%) soared 79.5% year over year to $70 million.
 

Margin Analysis
 

Gross profit in the quarter under review totaled $168.8 million, up 41.9% year over year. However, DexCom generated gross margin (as a percentage of revenues) of 60.2%, which contracted 430 bps year over year. 
 

Research and development (R&D) expenses amounted to $59 million in the quarter, up 31.7% year over year. Selling, general and administrative expenses totaled $124.2 million in the reported quarter, up 18.5% year over year.
 

The company reported total operating expenses of $183.2 million, up 22.5% year over year. As a percentage of revenues, DexCom generated operating margin of 34.6% in the first quarter.
 

Financial Position
 

As of Mar 31, 2019, DexCom had $1.36 billion in cash and marketable securities.
 

Total cash and cash equivalents came in at $1.29 billion, up 13% from 2018-end level.
 

Guidance Raised
 

DexCom now expects revenues in the range of $1.25-$1.3 billion (up from the previously guided range of $1.18-$1.23 billion). The Zacks Consensus Estimate for revenues is currently pegged at $1.23 billion, which is below the lower end of the guided range.
 

Gross profit margin is projected to be 64% to 65% of net revenues.
 

While adjusted operating margin is expected to be about 6% of net revenues, adjusted EBITDA margin is anticipated to be 18%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -109.74% due to these changes.

VGM Scores

Currently, DexCom has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 looks promising. Notably, 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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