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Insulet (PODD) Q2 Loss Narrower Than Expected, Revenues Lag

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Insulet Corporation (PODD - Free Report) incurred net loss per share of 3 cents in second-quarter 2018 compared with net loss of 13 cents in the prior-year quarter. Further, the figure in the reported quarter was narrower than the Zacks Consensus Estimate of a loss of 13 cents.

Revenues in Detail

Revenues in the second quarter totaled $124.3 million, missing the Zacks Consensus Estimate by 6.5%. However, the top line improved 13.2% from the year-ago quarter.

Per management, the revenue upside was led by solid uptake of the Omnipod System in the United States. Expanding global customer base also drove revenues.

Insulet reported U.S. Omnipod revenues of $78.1 million, reflecting an increase of 19% year over year.

Insulet Corporation Price, Consensus and EPS Surprise

 

International Omnipod revenues of $28.5 million were up 7%. Revenues from international business were lower-than-expected due to channel inventory in Europe. This also comprised a reduction of $7.4 million in revenues for the repurchase of the company’s inventory from a former European distributor. Per management, this is a short-term impact and the European market still holds immense potential.

Further, revenues from the Drug Delivery business were $17.7 million, down 1% year over year.

Margins

Gross profit in the reported quarter totaled $82.1 million, up 27.1% from the prior-year quarter. Gross margin came in at 66%, up 710 basis points (bps). The upside was led by continuous improvements in the company’s manufacturing and supply chain operations. Furthermore, favorable mix in the second quarter on lower international distributor sales also contributed to the gross margin expansion.

Total operating expenses came in at $77.7 million compared with $68 million in the prior-year quarter. Operating income in the reported quarter came in at $4.3 million against an operating loss of $3.4 million in the prior-year quarter.

Guidance Revised

For 2018, the company lowered its revenue guidance to a range of $547-$562 million from $565-$580 million expected earlier, reflecting growth of around 18-21% from $463.8 million reported in 2017. Insulet revised its expectations for the International Omnipod product line due to the short-term impact of shifting to direct operations in Europe. However, the company raised its revenue projections for U.S. Omnipod and Drug Delivery product lines. The Zacks Consensus Estimate for revenues is pegged at $576.9 million, above the guided range.

For the third quarter of 2018, Insulet expects revenues in the range of $144.5-$151.5 million, reflecting growth of approximately 19-24% compared with $121.8 million reported in the year-ago quarter. The Zacks Consensus Estimate for the metric is pegged at $165.7 million, above the guided range.

Our Take

Insulet exited the second-quarter 2018 on a mixed note. We are encouraged by the year-over-year improvement in results on solid uptake of Omnipod system in the United States. Expanding global customer base also drove revenues. Furthermore, expanding gross margin buoys optimism. We are also upbeat about Insulet’s solid progress with respect to its four-pillar strategy. 

Meanwhile, management expects adverse short-term impacts of shifting to direct operations in Europe to continue hurting international revenues. Moreover, Insulet is exposed to risks associated with a weaker global economy and lower reimbursement rates. 

Zacks Rank & Other Key Picks

Insulet currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader medical sector which reported solid results this earnings season include Intuitive Surgical (ISRG - Free Report) , Chemed Corporation (CHE - Free Report) and Align Technology, Inc. (ALGN - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), Chemed and Align Technology carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported second-quarter 2018 adjusted earnings per share (EPS) of $2.76, which beat the Zacks Consensus Estimate of $2.48. Revenues totaled $909.3 million, also surpassing the consensus estimate of $870 million.

Chemed reported second-quarter 2018 adjusted EPS of $2.81, which trumped the Zacks Consensus Estimate of $2.68. Revenues of $441.8 million edged past the Zacks Consensus Estimate of $432.3 million.

Align Technology posted second-quarter 2018 adjusted EPS of $1.30, steering past the Zacks Consensus Estimate of $1.09. Revenues came in at $490.3 million, beating the consensus estimate of $462.9 million.

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