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Why Is Insulet (PODD) Down 7.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Insulet (PODD - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Insulet 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 drivers.

Insulet Q2 Earnings, Revenues Beat Estimates

Insulet announced second-quarter 2020 earnings per share (EPS) of 22 cents in contrast to the Zacks Consensus Estimate of a loss of a penny per share. The reported figure also marked a stupendous rise from the year-ago EPS of 2 cents.

Revenues in Detail

Revenues in the second quarter totaled $226.3 million, beating the Zacks Consensus Estimate by 6.8%. Moreover, the top line jumped 27.8% from the year-ago number (up 28.8% at constant exchange rate or CER).

Segment in Detail

Insulet delivered second-quarter total Omnipod revenues of $202 million, reflecting an increase of 25.6% year over year (up 26.8% at CER).

International Omnipod revenues of $73.2 million were up 19.7% at CER exceeding the company’s expectation of 15% to 19% growth at CER. The revenue uptick included a benefit of approximately $2 million of channel inventory build due to COVID-19 and to a lesser extent better-than-expected new Omnipod starts.

U.S. Omnipod revenues grew 31.3% year over year to$128.8 million.

The Drug Delivery business revenues totaled $24.3 million, up 49.1% year over year exceeding the company’s expectation of $20 million for the second quarter. This was primarily a result of a shift in production timing from the first quarter to the second.

Margins

Gross profit in the reported quarter was $142.5 million, up 22.4% from the prior-year quarter. However, gross margin of 62.9% contracted 276 basis points (bps). According to the company, this included roughly a 180-bps impact due to COVID-19-related safety and mitigation costs.

Meanwhile, selling, general & administrative expenses rose 6.6% to $80.8 million. Research and development expenses went up 3.6% year over year to $34.2 million. Operating expenses of $115 million rose 5.7% year over year.

Operating profit totaled $27.5 million, reflecting a 261.8% rise from the prior-year quarter. Further, adjusted operating margin in the second quarter expanded 786 bps to 12.2%.

2020 Guidance

Insulet has provided an update to its earlier-stated guidance for 2020 despite the uncertainties related to the extent and duration of business disruptions due to the pandemic. The company anticipates the pandemic and the recessionary headwinds to persist throughout 2020, with an estimated gradual recovery starting in the third quarter.

Overall, for the year, total revenues are expected to grow in the band of 17 at CER (an increase from 15% expectation stated earlier). The Zacks Consensus Estimate for total revenues is pegged at $849 million.

Total Omnipod revenues are likely to grow 18 at CER (the previously-provided guidance was 18%). U.S. Omnipod revenue growth is expected in the range of 19 (19%). Further, International Omnipod revenue growth is likely to be 17 at CER (an increase from the earlier-provided 16% growth projection). Drug Delivery revenues are expected to rise in the band of 3% to 6%(earlier was expected to decline around the mid-point of 15-20%).

For the third quarter of 2020, Insulet projects revenue growth of 13-15% at CER. The Zacks Consensus Estimate for revenues is pegged at $212.3 million.

Total Omnipod revenues are expected to grow 12-14%.  U.S. Omnipod revenues are likely to expand 14-16% at CER, whereas International Omnipod revenue growth is projected in the range of 9-11% at CER. Revenues in the Drug Delivery segment are expected to grow 23-28%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -15.44% due to these changes.

VGM Scores

Currently, Insulet has a strong Growth Score of A, a grade with the same score on the momentum front. 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 trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Insulet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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