Tandem Diabetes Care, Inc. ( TNDM Quick Quote TNDM - Free Report) has been gaining on robust domestic and international pump sales and shipments. Its better-than-expected revenues in the first quarter of 2021 buoy optimism. However, stiff competition and escalating costs are concerning.
Over the past year, the Zacks Rank #3 (Hold) stock has lost 6.4% against 13.4% growth of the
industry and 42.3% rise of the S&P 500 composite.
The renowned designer, developer and distributor of insulin pumps has a market capitalization of $4.94 billion. The company expects to maintain strong product performance. The company surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 36.57%.
Let’s delve deeper.
Key Drivers Strong Q1 Results: Tandem Diabetes delivered better-than-expected results for the first quarter of 2021. The robust top-line growth amid post-pandemic business recovery is impressive. Strong domestic and international pump sales along with robust domestic and international pump shipments buoy optimism. Continued strength in demand for t:slim X2 insulin pumps across the globe and rising customer adoption of the company’s Control-IQ technology look encouraging. Expansion of both margins and a raised 2021 sales forecast bode well for the stock. Focus on International Markets: The company’s expansion into three geographies viz Germany, France and the Benelux countries are expected to have contributed to international revenues. In the first quarter of 2021, Tandem Diabetes witnessed high international demand for the t:slim X2 pump. The pump shipments to international market exceeded the company’s expectations, reaching 8,700 for the quarter. This reaches the total to more than 50,000 customers for the international installed base. Product Pipeline Innovation Continues: Tandem Diabetes constantly undertakes innovation and develops products to cater to consumers’ and clinical needs. Currently, products under development include AID systems, a next-generation hardware platform as well as connected (mobile) health offerings. Per last quarter’s earnings call, the company noted that it is planning to launch Control-IQ in Canada in early 2021 and also in Germany and France in late 2021. Further, the company noted that it is working toward Type 2 indication for Control-IQ as well. Downsides Tough Competitive Pressure: Tandem Diabetes operates in a highly competitive environment, dominated by firms ranging from large multinational corporations with significant resources to start-ups. Also, the competitive and regulatory conditions in the markets where the company operates limit the company’s ability to switch to strategies like price increases. Escalating Operating Expenses: We are concerned about Tandem Diabetes’ rising costs. In the first quarter of 2021, selling, general and administrative expenses rose 17.8%. Research and development expenses also rose 22.7% on the company’s continued focus to drive long-term sales and profitability initiative. Estimate Trend
Tandem Diabetes has been witnessing a positive estimate revision trend for 2021. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 200% north to 6 cents.
The Zacks Consensus Estimate for the company’s second-quarter fiscal 2021 revenues is pegged at $144.6 million, suggesting 32.4% growth from the year-ago reported number.
A few better-ranked stocks from the broader medical space are
National Vision Holdings, Inc. ( EYE Quick Quote EYE - Free Report) , Owens & Minor, Inc. ( OMI Quick Quote OMI - Free Report) and Envista Holdings Corporation ( NVST Quick Quote NVST - Free Report) . While Owens & Minor sports a Zacks Rank #1 (Strong Buy), Envista Holdings and National Vision carry a Zacks Rank 2 (Buy). You can see the complete list of Zacks #1 Rank stocks here.
Owens & Minor has a projected long-term earnings growth rate of 15%.
National Vision has a projected long-term earnings growth rate of 12%.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
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