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Is Insulet Stock a Smart Addition to Your Portfolio Right Now?

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Insulet Corporation (PODD - Free Report) is driving share gains with its prime Omnipod 5 AID (automated insulin delivery) system, which is highly promising for growth in the upcoming quarters. The company continues to expand the platform to new countries with sensor integrations. A strong solvency position also bodes well for the stock. However, the mounting costs of Omnipod 5 production, coupled with its excessive reliance on this offering, raise concerns for the company.

In the past year, this Zacks Rank #2 (Buy) stock has increased 67.8% compared to a 33.7% rise in the industry. It also outperformed the S&P 500 composite’s 39.2% gain in the same time frame.

The developer, manufacturer and distributor of insulin delivery systems has a market capitalization of $16.58 billion. Insulet projects a long-term estimated earnings growth rate of 17.6% compared with 15.6% of the industry. PODD’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, delivering an average surprise of 67.53%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Factors Driving PODD Stock

Making Strides With Omnipod 5: Insulet’s game-changing Omnipod 5 fully disposable pod-based AID system is successfully driving market growth. The product features attributes such as on-body wearability, simplicity, ease of use and broad accessibility, which are the key drivers of its rapid adoption. In the second quarter of 2024, Omnipod 5 integrated with Dexcom’s G6 CGM significantly contributed to the 27% growth in U.S. Omnipod revenues. The company began the full-market release of the Omnipod 5 with G7, which is exclusively available through several specialty pharmacies.

Additionally, Omnipod 5 is now FDA-cleared for use by people with type 2 diabetes, aged 18 years and above. The milestone development caters to nearly 30 million people living with type 2 diabetes in the United States, with approximately six million people who require insulin, of which two and a half million are using multiple daily injections (MDI). Insulet’s strategy of transitioning people from MDI onto Omnipod therapy is driving significant growth in its customer base. Meanwhile, the company also hinted at launching the Omnipod 5 with Abbott’s Freestyle Libre 2 Plus sensor in the United States by the end of this year.

Focus on Market Expansion: Insulet is expanding its global presence in a targeted and strategic manner. After the successful launches in the United Kingdom and Germany last year, the company introduced the Omnipod 5 in France — one of its largest markets — and the Netherlands in June 2024. Plans are also being finalized for additional launches in the Nordics, Canada, Australia, Switzerland and Belgium. Additionally, it commenced the full market release of Omnipod 5 with Libre 2 Plus in the United Kingdom and the Netherlands for individuals aged two years and above with type 1 diabetes.

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Insulet will soon launch the Omnipod 5 with Dexcom’s G6 sensor in France. Omnipod DASH is also doing well internationally and remains a sizable percentage of Insulet’s international volume. The company strengthened its global manufacturing capabilities with a new manufacturing plant in Malaysia to drive higher gross margins in the coming months.

Strong Solvency but Leveraged Balance Sheet: Insulet exited the second quarter of 2024 with cash and cash equivalents of $821 million and current debt of $38 million. This robust financial stability appears promising, especially during the prolonged macroeconomic issues. Long-term debt of $1.36 billion remained marginally in line with the 2024 first-quarter figure. Debt-to-capital improved sequentially by 5.6% to 58.3x at the second-quarter end.

Downsides for PODD Stock

Concerns Denting Profit Margin: Insulet is incurring higher costs associated with Omnipod 5 production. Added to this, supply-chain disruptions and labor shortages have continued to put pressure on margins. In the second quarter of 2024, selling, general & administrative expenses rose 24.4% year over year from higher headcount additions to manage routine costs and support commercial and international growth, as well as the new organizational structure.

Sole Reliance on the Omnipod System: Insulet’s financial results continue to depend on the performance of its lead product — the Omnipod System. Per the company, any adverse changes in the market acceptance of the product or worsening of the factors that negatively influence the sale will dent the company’s financials majorly.

PODD's Estimate Trend

The Zacks Consensus Estimate for Insulet’s 2024 earnings per share has remained constant at $3.04 in the past 30 days.

The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $2.01 billion. This suggests an 18.6% rise from the year-ago reported number.

Other Top Key Picks

Some other top-ranked stocks in the broader medical space are Phibro Animal Health (PAHC - Free Report) , Haemonetics (HAE - Free Report) and Baxter International (BAX - Free Report) . While Phibro Animal Health sports a Zacks Rank #1 (Strong Buy), Haemonetics and Baxter International each carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Phibro Animal Health’s earnings are expected to increase 31.9% in fiscal 2025. Its shares have surged 122.3% compared with the industry’s 33.8% growth in the past year. PAHC’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed in one, the average surprise being 4.1%.

Haemonetics has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 11.6% growth. Shares of the company have declined 15.2% against the industry’s 33.8% growth in the past year. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 3.5%.

Baxter International has an estimated 2024 earnings growth rate of 13.9% compared with the industry’s 11.6% growth. Shares of the company have surged 15.9% compared with the industry’s 33.8% growth in the past year. BAX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.7%.


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