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Here's Why You Should Retain Insulet (PODD) Stock for Now
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Insulet Corporation (PODD - Free Report) is poised to gain in the coming quarters owing to the strength of its revolutionary offering, the Omnipod 5 Automated Insulin Delivery (“AID”) system. The flourishing diabetes market raises optimism for the company’s operations. A strong solvent balance sheet is highly encouraging.
Meanwhile, elevated costs and the impact of macroeconomic pressures may adversely affect Insulet’s results of operations.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 35.6% against the 3.9% rise of the industry and 23.1% growth of the S&P 500 composite.
The developer, manufacturer and distributor of insulin delivery systems has a market capitalization of $12.18 billion. Insulet projects a long-term estimated earnings growth rate of 35.7% compared with 11.1% of the industry. PODD’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 105.14%.
Let’s delve deeper.
Upsides
Omnipod 5, a New Focus: Insulet has been making progress in its development roadmap of the Omnipod Horizon (now Omnipod 5) AID system. Recent market research by Seagrove Partners suggested that a large percentage of respondents would choose to switch to Horizon, thereby making it the most successful standalone product. The company has been registering significant progress in its Horizon clinical development work. Insulet believes Omnipod 5 will be a game-changer for people with diabetes. The company is also working to expand Omnipod 5 reach to preschoolers.
Image Source: Zacks Investment Research
Omnipod 5 continues to disrupt the diabetes technology market as the only FDA-approved, fully disposable, pod-based automated insulin delivery system. Omnipod 5 continues to be a driving force of the strong U.S. growth. In the third quarter, Omnipod's new customer starts coming from multiple daily injections and legacy tubed pumps was an estimated 80%-20% split in the United States, which is in line with the company’s historical mix. Meanwhile, the company has completed the commercial launch of Omnipod 5 in the United Kingdom and Germany.
Strong Solvency but Leveraged Balance Sheet: Insulet exited the third quarter of 2023 with cash and cash equivalents of $685.4 million, while short-term debt payable remained much low at $50 million. Long-term debt was $1.37 billion in the period, slightly down from $1.39 billion at the end of the second quarter.
The company has a debt-to-capital ratio of 70%, a decrease from 71.6% at the end of the second quarter of 2023. Meanwhile, times interest earned for the company stands at 9.1%, a huge increase from the second quarter’s 5.7%.
Booming Diabetes Market: An aging population, unhealthy lifestyle, rising awareness and higher expenditure on healthcare are likely to continue driving the highly competitive diabetes market. PODD noted that its international expansion would further increase its global addressable market beyond the 11 million to 12 million people living with insulin-dependent diabetes throughout global markets. Insulet expanded its global presence in seven new countries within Europe, the Middle East and the Asia Pacific and also entered Australia and Turkey.
Insulet made significant investments to advance the diabetes business, such as acquiring the assets of Automated Glucose Control LLC (AGC) — a company in Palo Alto, CA, focused on developing and commercializing best-in-class AID technology as well as assets related to Bigfoot’s pump-based AID technologies.
Downsides
Concerns Denting the Profit Margin: Insulet is incurring higher costs associated with Omnipod 5 production. Added to this, higher production costs due to global inflation, supply chain disruptions and labor shortages continue to put pressure on margins. During the third quarter, SG&A expenses rose 28.7%, while research and development expenses increased 28.4% year over year.
Economic Uncertainty Hampers Growth: Weaker global economic conditions may reduce the demand for Insulet’s products, intensify competition, exert pressure on prices, dent supply and lengthen the sales cycle. Moreover, many countries in Western Europe are facing a liquidity crunch. Insulet is also exposed to the risk of a reduction in healthcare spending in the United States, Canada and Europe due to an economic slump. We are particularly cautious as growth could moderate further if the economic scenario worsens.
Estimate Trend
The Zacks Consensus Estimate for Insulet’s 2023 earnings per share (EPS) has moved up from $1.91 to $1.97 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $1.65 billion. This suggests a 26.2% rise from the year-ago reported number.
Cardinal Health has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 33.2% compared with the industry’s 9.4% rise in the past year.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.46% against the industry’s -0.75%. Shares of the company have increased 32.5% compared with the industry’s 3.8% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 17.3% compared with the industry’s 11.9%. Shares of DVA have rallied 42.8% compared with the industry’s 8.1% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.
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Here's Why You Should Retain Insulet (PODD) Stock for Now
Insulet Corporation (PODD - Free Report) is poised to gain in the coming quarters owing to the strength of its revolutionary offering, the Omnipod 5 Automated Insulin Delivery (“AID”) system. The flourishing diabetes market raises optimism for the company’s operations. A strong solvent balance sheet is highly encouraging.
Meanwhile, elevated costs and the impact of macroeconomic pressures may adversely affect Insulet’s results of operations.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 35.6% against the 3.9% rise of the industry and 23.1% growth of the S&P 500 composite.
The developer, manufacturer and distributor of insulin delivery systems has a market capitalization of $12.18 billion. Insulet projects a long-term estimated earnings growth rate of 35.7% compared with 11.1% of the industry. PODD’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 105.14%.
Let’s delve deeper.
Upsides
Omnipod 5, a New Focus: Insulet has been making progress in its development roadmap of the Omnipod Horizon (now Omnipod 5) AID system. Recent market research by Seagrove Partners suggested that a large percentage of respondents would choose to switch to Horizon, thereby making it the most successful standalone product. The company has been registering significant progress in its Horizon clinical development work. Insulet believes Omnipod 5 will be a game-changer for people with diabetes. The company is also working to expand Omnipod 5 reach to preschoolers.
Image Source: Zacks Investment Research
Omnipod 5 continues to disrupt the diabetes technology market as the only FDA-approved, fully disposable, pod-based automated insulin delivery system. Omnipod 5 continues to be a driving force of the strong U.S. growth. In the third quarter, Omnipod's new customer starts coming from multiple daily injections and legacy tubed pumps was an estimated 80%-20% split in the United States, which is in line with the company’s historical mix. Meanwhile, the company has completed the commercial launch of Omnipod 5 in the United Kingdom and Germany.
Strong Solvency but Leveraged Balance Sheet: Insulet exited the third quarter of 2023 with cash and cash equivalents of $685.4 million, while short-term debt payable remained much low at $50 million. Long-term debt was $1.37 billion in the period, slightly down from $1.39 billion at the end of the second quarter.
The company has a debt-to-capital ratio of 70%, a decrease from 71.6% at the end of the second quarter of 2023. Meanwhile, times interest earned for the company stands at 9.1%, a huge increase from the second quarter’s 5.7%.
Booming Diabetes Market: An aging population, unhealthy lifestyle, rising awareness and higher expenditure on healthcare are likely to continue driving the highly competitive diabetes market. PODD noted that its international expansion would further increase its global addressable market beyond the 11 million to 12 million people living with insulin-dependent diabetes throughout global markets. Insulet expanded its global presence in seven new countries within Europe, the Middle East and the Asia Pacific and also entered Australia and Turkey.
Insulet made significant investments to advance the diabetes business, such as acquiring the assets of Automated Glucose Control LLC (AGC) — a company in Palo Alto, CA, focused on developing and commercializing best-in-class AID technology as well as assets related to Bigfoot’s pump-based AID technologies.
Downsides
Concerns Denting the Profit Margin: Insulet is incurring higher costs associated with Omnipod 5 production. Added to this, higher production costs due to global inflation, supply chain disruptions and labor shortages continue to put pressure on margins. During the third quarter, SG&A expenses rose 28.7%, while research and development expenses increased 28.4% year over year.
Economic Uncertainty Hampers Growth: Weaker global economic conditions may reduce the demand for Insulet’s products, intensify competition, exert pressure on prices, dent supply and lengthen the sales cycle. Moreover, many countries in Western Europe are facing a liquidity crunch. Insulet is also exposed to the risk of a reduction in healthcare spending in the United States, Canada and Europe due to an economic slump. We are particularly cautious as growth could moderate further if the economic scenario worsens.
Estimate Trend
The Zacks Consensus Estimate for Insulet’s 2023 earnings per share (EPS) has moved up from $1.91 to $1.97 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $1.65 billion. This suggests a 26.2% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Cardinal Health (CAH - Free Report) , Stryker (SYK - Free Report) and DaVita (DVA - Free Report) .
Cardinal Health has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8%. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. Its shares have increased 33.2% compared with the industry’s 9.4% rise in the past year.
CAH carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker, carrying a Zacks Rank #2 at present, has an earnings yield of 3.46% against the industry’s -0.75%. Shares of the company have increased 32.5% compared with the industry’s 3.8% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.09%. In the last reported quarter, it delivered an average earnings surprise of 5.81%.
DaVita, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 17.3% compared with the industry’s 11.9%. Shares of DVA have rallied 42.8% compared with the industry’s 8.1% rise over the past year.
DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.