DexCom, Inc. (DXCM Quick QuoteDXCM - Free Report) is well-poised for growth in the coming quarters, backed by its strong product portfolio. A robust fourth-quarter 2022 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, stiff competition and reimbursement risks persist.

So far this year, this Zacks Rank #3 (Hold) stock has gained 1.4% compared with a 2.3% increase of the industry and a 7.5% rise of the S&P 500.

This renowned medical-devices company and provider of continuous glucose monitoring (CGM) systems has a market capitalization of $44.45 billion. The company projects 39% growth for the next five years and expects to maintain its strong performance. DexCom’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missed the same in one and matched estimates in one, delivering an earnings surprise of 2.86%, on average.

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Let’s delve deeper.

Strong Product Portfolio: We are upbeat about DexCom's continued strength in its CGM products. It launched an updated sensor algorithm in multiple countries in the second half of 2022, making the latest G7 sensor technology available to international markets. The company received FDA clearance for G7 sensor technology in December 2022. These developments are likely to support the company’s future growth. The company also launched the easy-to-use Dexcom ONE real-time CGM System on prescription via the NHS England, Wales, Scotland and Northern Ireland drug tariff to everyone with type 1 or type 2 diabetes using insulin in 2022.

DexCom’s prospects in alternative markets, such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it a competitive edge in the MedTech space.

Positive Coverages: DexCom's products have been receiving increasing coverage over the past few months, raising our optimism. The company, in June 2022, announced that people with type 1 and type 2 diabetes aged two years and above on multiple daily injections of insulin (three or more) or who use an insulin pump may now be eligible for public coverage of the Dexcom G6 CGM System via Prince Edward Island’s Diabetes Glucose Sensor Program.DexCom ended the fourth quarter with new patient additions.

The Ontario government started coverage for the Dexcom G6 CGM System through Ontario’s Assistive Devices Program. This program is for people with type 1 diabetes living in the province who are above the age of two years and meet coverage criteria in March.

Strong Q4 Results: DexCom’s solid fourth-quarter 2022 revenues buoy optimism. Rising volumes across all channels, along with strong new customer additions, owing to increasing global awareness of the benefits of real-time CGM, contributed to the upside. Impressive contributions from the Sensor segment and domestic and international revenue growth were key catalysts. Additionally, the glucose monitoring market presents significant commercial opportunities for the company.

Downsides

Rising Costs: DexCom's gross margin contracted 130 basis points during the fourth quarter to 66.4%, reflecting the rising cost of sales. The company expects adjusted gross margin to be 62-63%, reflecting cost pressure to continue.

Stiff Competition: The market for blood glucose monitoring devices is highly competitive, subject to rapid change and significantly affected by new product introductions. DexCom’s competitors manufacture and market products for the single-point finger stick device market and collectively account for substantially all worldwide sales of self-monitored glucose testing systems currently.

Estimate Trend

DexCom is witnessing an upward estimate revision trend for 2023 and 2024. In the past 30 days, the Zacks Consensus Estimate for its earnings gained 1 cent for 2023 and 2024 to $1.07 per share and $1.45 per share, respectively.

The Zacks Consensus Estimate for the company’s first-quarter 2023 revenues is pegged at $719.9 million, suggesting a 14.5% improvement from the year-ago quarter’s reported number. The same for earnings per share is pegged at 15 cents, implying 87.5% growth year over year.

DexCom, Inc. Price

DexCom, Inc. price | DexCom, Inc. Quote

Stocks to Consider

Some better-ranked stocks in the broader medical space are Becton, Dickinson and Company (BDX Quick QuoteBDX - Free Report) , Henry Schein (HSIC Quick QuoteHSIC - Free Report) and The Cooper Companies (COO Quick QuoteCOO - Free Report) .

Becton, Dickinson and Company, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth of 7.8%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

So far this year, BDX’s shares have lost 0.2% against the industry’s 8% growth.

Henry Schein, sporting a Zacks Rank #1 at present, has an estimated long-term growth of 18.3%. Its earnings surpassed estimates in three of the trailing four quarters and met the same once, the average beat being 2.97%.

So far this year, the HSIC’s shares have gained 2.8% compared with the industry’s 8% growth.

The Cooper Companies, carrying a Zacks Rank #2 at present, has an estimated long-term growth of 11%. The company’s earnings missed estimates in each of the trailing four quarters, the average negative surprise being 1.82%.

So far this year, the COO’s shares have gained 12.7% compared with the industry’s 8% growth.