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DexCom (DXCM) Beats Q2 Earnings Estimates, Raises '18 View

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DexCom, Inc. (DXCM - Free Report) reported loss of 10 cents per share in the second quarter of 2018, narrower than the Zacks Consensus Estimate of a loss of 20 cents. Also, the figure improved from a loss of 16 cents in the year-ago quarter.

The stock has a Zacks Rank #3 (Hold).

Total revenues rallied 42.1% to $242.5 million from $170.6 million in the year-ago quarter. Revenues surpassed the Zacks Consensus Estimate of $205 million.

Segmental Details

Revenues in the Sensor segment (74% of total revenues) surged 47% on a year-over-year basis to $179.4 million. Transmitter revenues (18%) increased 26% year over year to $43.9 million. Receiver revenues (8%) rallied 36% year over year to $19.1 million.

DexCom, Inc. Price, Consensus and EPS Surprise

 

Operational Details

DexCom generated gross margin (as a percentage of revenues) of 63.3%, which contracted 560 basis points (bps) year over year. Margins were under pressure due to an inventory change and shift toward OUS and Medicare.

International business displayed consistent growth in the quarter, up 78% on a year-over-year basis to $52.9 million.

Research and development (R&D) expenses totaled $47.2 million in the quarter, up4.2% year over year.

Selling, general and administrative expenses totaled $111.3 million in the reported quarter, increasing 29.7% year over year.

Guidance

DexCom raised 2018 guidance.

The company expects revenues of $925 million, up from the previous range of $850-$860 million. Meanwhile, the Zacks Consensus Estimate for revenues is currently pegged at $861.2 million, which is significantly lower than the guidance.

Reported operating expenses, excluding investments in non-intensive programs, are expected to increase 14% from 2017 level, significantly higher than the previous forecast of 10%.

However, gross profit margin is projected to be 64%, lower than the previous guidance of 65-68%.

In Conclusion

DexCom reported loss in second-quarter2018, narrower than the Zacks Consensus Estimate of a loss. Solid contributions from the Sensor, Transmitter and Receiver segments are key catalysts. The glucose monitoring market presents significant commercial opportunity for DexCom. The company’s opportunities in alternative markets such as the non-intensive diabetes management space, the hospital, gestational, pre-diabetes and obesity are likely to provide the company a competitive edge in the MedTech space. Further, the company’s next-generation fully-disposable CGM systems are also in progress.

On the flip side, cutthroat competition in the market for blood & glucose monitoring devices is a headwind for DexCom at the moment. We believe that the company’s margins will continue to be under pressure in the coming quarters, thanksto high product development costs and rising expenditures on the R&D front. Lower expected margins on transmitter sales are also a cause of concern.

Q2 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season are Stryker Corporation (SYK - Free Report) , Intuitive Surgical, Inc (ISRG - Free Report) and Illumina, Inc (ILMN - Free Report) .

While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Stryker carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.

Stryker reported second-quarter 2018 adjusted earnings per share of $1.76, beating the Zacks Consensus Estimate by 1.7%. Earnings improved 15% year over year and also exceeded the high end of the company’s guidance.

Illumina reported adjusted earnings of $1.43 per share, beating the Zacks Consensus Estimate of $1.11.

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