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DexCom (DXCM) Beats Q3 Earnings Estimates, Raises '18 View

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DexCom, Inc. (DXCM - Free Report)   reported adjusted earnings of 17 cents per share in the third quarter of 2018, beating the Zacks Consensus Estimate of a loss of 12 cents. Also, the figure improved from a loss of 4 cents in the year-ago quarter.

The stock sports a Zacks Rank #1 (Strong Buy).

Total revenues rallied 44.5% to $266.7 million on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate of $242 million.

DexCom, Inc. Price and Consensus

 

DexCom, Inc. Price and Consensus | DexCom, Inc. Quote

Segmental Details

Revenues in the Sensor segment (73% of total revenues) surged 47% on a year-over-year basis to $194 million. Transmitter revenues (18%) increased 27% year over year to $48.5 million. Receiver revenues (9%) rallied 68% year over year to $24.2 million.

Geographical Details

U.S. revenues (76% of total revenues) surged 34% on a year-over-year basis to $202.4 million. International revenues (24%) rocketed 93% year over year to $64.3 million

Operational Details.

Gross Profit in the quarter totaled $168.6 million, up 32.8% year over year.

DexCom generated gross margin (as a percentage of revenues) of 63.2%, which contracted 560 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 totaled $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 net operating expenses of $154.7 million, up 21% year over year. As a percentage of revenues, DexCom generated operating margin of 5.2% in the third quarter.

Guidance

DexCom raised 2018 guidance.

The company expects revenues of $975 million, up from the previous projection of $925 million. Meanwhile, the Zacks Consensus Estimate for revenues is currently pegged at $967.4 million, which is significantly lower than the guidance.

Reported operating expenses, excluding investments in non-intensive programs, are expected to increase 18% from 2017 level. The estimate is significantly higher than the previous forecast of 14%.

However, gross profit margin is projected to be 64%, in line with the prior guidance.

Wrapping Up

DexCom exited the third quarter on a strong note, beating the Zacks Consensus Estimate for earnings and revenues. Impressive contributions from the Sensor, Transmitter and Receiver segments are key catalysts. A raised guidance instills investors’ optimism. The glucose monitoring market presents significant commercial opportunity for DexCom. The company’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 a headwind. We believe that the company’s margins will continue to remain under pressure in the upcoming quarters, thanks to high product development costs and rising expenditures on the R&D front. Lower expected margins on transmitter sales are add to the concerns.

Q3 Earnings of MedTech Majors at a Glance

Other top-ranked stocks from the broader Medical space that delivered robust results this earnings season are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc (MMSI - Free Report) . Notably, each of the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted earnings per share (EPS) of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, which outpaced the consensus mark of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, which outpaced the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus mark of $218 million.

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