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DexCom (DXCM) Q2 Earnings and Revenues Surpass Estimates

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DexCom, Inc.’s (DXCM - Free Report) second-quarter 2020 adjusted earnings of 79 cents per share surpassed the Zacks Consensus Estimate of 31 cents by 154.8%. Notably, the company reported earnings per share of 8 cents in the prior-year quarter.

Total revenues surged 34.4% to $451.8 million on a year-over-year basis and beat the Zacks Consensus Estimate by 11.1%. Rising volumes across all channels, strong new patient additions and increasing global awareness of the benefits of real-time Continuous Glucose Monitoring (CGM) contributed to the upside.

Segmental Details

Revenues at the Sensor and other revenue segment (81% of total revenues) climbed 40% on a year-over-year basis to $364.5 million. Hardware revenues (19%) improved 14.9% year over year to $87.3 million.

Geographical Details

U.S. revenues (81% of total revenues) increased 37.8% on a year-over-year basis to $367.1 million. International revenues (19%) grew 20.8% year over year to $84.7 million.

DexCom, Inc. Price, Consensus and EPS Surprise

DexCom, Inc. Price, Consensus and EPS Surprise

DexCom, Inc. price-consensus-eps-surprise-chart | DexCom, Inc. Quote

Margin Analysis

Adjusted gross profit in the quarter under review totaled $289.7 million, up 40.3% year over year. DexCom generated adjusted gross margin (as a percentage of revenues) of 64.1%, which expanded 270 basis points (bps) year over year.

Research and development expenses amounted to $79.9 million in the quarter, up 15.8% year over year. Selling, general and administrative expenses totaled $136.4 million in the reported quarter, down 1.4% year over year.

The company reported total operating expenses of $216.3 million, up 4.3% year over year.

The company reported adjusted operating income of $76.7 million compared with $6.2 million in the prior-year quarter. Adjusted operating margin (as a percentage of revenues) of 17%, which expanded 1510 bps year over year.

Financial Position

The company exited the second quarter with $530 million in cash and cash equivalents, which grew 18.8% from year-end 2019.

2020 Guidance

DexCom has decided to reinstate its full-year 2020 guidance.

The company expects revenues to be around $1.85 billion, reflecting growth of 25% from the previous year. Adjusted gross margin is anticipated to meet or exceed 65%, while adjusted operating margin is estimated to be 14% or higher.

Wrapping Up

DexCom exited the second quarter on a strong note, wherein both earnings and revenues beat the Zacks Consensus Estimate. Impressive contributions from the segments were key catalysts. Expansion in both gross and operating margins is a positive.

Additionally, the glucose monitoring market presents significant commercial opportunity for this company. DexCom’s prospects 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.

During the quarter under review, the company made Dexcom CGM systems available in the United States for utilization in hospitals and other healthcare facilities in order to help frontline workers during the COVID-19 pandemic. Further, the company received the CE mark for use of its G6 CGM system on the back of the upper arm. These developments instill optimism in the stock amid this turbulent period.

Meanwhile, cut-throat competition in the market for blood & glucose monitoring devices remains a concern.

Zacks Rank

Currently, DexCom carries a Zacks Rank of 3 (Hold).

Key Picks

Some better-ranked stocks in the broader medical space are ViewRay, Inc. (VRAY - Free Report) , Opko Health (OPK - Free Report) and ResMed Inc. (RMD - Free Report) , each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for ViewRay’s second-quarter 2020 bottom line is pegged at a loss of 16 cents per share, indicating 50% narrower loss than the year-ago reported quarter figure.

The Zacks Consensus Estimate for Opko Health’s second-quarter 2020 bottom line stands at a loss of 7 cents per share, suggesting an improvement of 30% from the year-ago period. The same for revenues is pegged at $234.6 million, indicating growth of 3.6% from the year-earlier reported figure.

The Zacks Consensus Estimate for ResMed’s fourth-quarter fiscal 2020 revenues is pegged at $710.9 million, suggesting growth of 0.9% from the year-earlier reported figure. The same for adjusted earnings per share stands at 99 cents, indicating an improvement of 4.2% from the year-ago quarter.

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