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Inogen (INGN) Beats on Q2 Earnings, Lifts '18 Sales Guidance

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Inogen, Inc. (INGN - Free Report) posted second-quarter 2018 earnings per share of 65 cents, beating the Zacks Consensus Estimate by 47.7%. Earnings also improved a whopping 71.1% from the year-ago quarter.

Revenues totaled $97.2 million, which outpaced the Zacks Consensus Estimate of $81.6 million. On a year-over-year basis, revenues climbed 51.6%.

Over the past year, shares of Inogen have skyrocketed 129.9% against the industry’s decline of 4.6%.

The stock carries a Zacks Rank #2 (Buy).

Segmental Details

Sales revenues totaled $92 million, up 58.5% on a year-over-year basis.

Business-to-business sales in the United States totaled $32.9 million, up 55.7% on a year-over-year basis.

Per management, the upside can be attributed to continued success with Inogen’s private label partner and traditional home medical equipment providers.

Internationally, this segment recorded sales of $20.8 million, up 39.1% year over year.

Management believes that continued adoption from the company’s European partners and favorable currency exchange rates drove overseas sales.

Direct-to-consumer revenues in the United States grossed $38.3 million in the quarter. This reflects an increase of 74.3% from the prior-year quarter.

Per management, results at this segment exceeded the company’s expectations owing to increased sales representative headcount and associated consumers' advertising. Inogen expects to increase hiring in Cleveland by 2020-end to 500 employees.

The segment posted rentals worth $5.3 million, down 13.7% from the year-ago quarter.

Inogen, Inc Price, Consensus and EPS Surprise

 

Inogen, Inc Price, Consensus and EPS Surprise | Inogen, Inc Quote

Margins

In the quarter under review, gross profit totaled $48.5 million, up 53.5% year over year. Gross margin came in at 49.8%, which expanded 60 basis points (bps) in the quarter.

Operating income totaled $14 million, which climbed a significant 65% year over year. Operating margin in the quarter was 14.4%, up 110 bps in the reported quarter.

Adjusted EBITDA in the quarter was $19 million, up 32.2% on a year-over-year basis.

Guidance

Inogen raised its 2018 revenue guidance to the range of $340 to $350 million from $310 to $320 million, representing year-over-year growth of 36.3% to 40.3%. The Zacks Consensus Estimate is pegged at $322.1 million, within the guided range.

Inogen expects direct-to-consumer sales to be its fastest growing channel and domestic business-to-business sales to have a significant growth rate in 2018. Internationally as well, business-to-business sales are expected to register solid growth as Inogen continues to focus on European markets. However, rental revenues are expected to decline 10% in 2018.

The company’s 2018 adjusted net income guidance range is at $45 to $48 million, up from $38 to $41 million, representing year-over-year growth of 114.3% to 128.5%.

Adjusted EBITDA for the year is expected between $65 million and $69 million, up from $62-$67 million, representing 27.9% to 35.7% year-over-year growth.

Our Take

Inogen exited the second quarter on a solid note. Solid business-to-business and direct-to-consumer sales in the United States are a major positive. Management is upbeat about solid contributions from the company’s core direct-to-consumer unit. Strong growth of the company’s business-to-business sales in Europe also buoys optimism. In fact, management expects to see strength in Europe in the quarters ahead. Management is also optimistic about the company’s increasing hiring in Cleveland. Expansion in margins and a raised 2018 guidance are encouraging as well.

On the flip side, Inogen’s rental revenues were soft in the quarter. In fact, management expects rental revenues to remain low throughout 2018. Rising operating expenses are discouraging as well. This is likely to keep margins under pressure. Stiff competition in the MedTech space is likely to mar prospects.

Q2 Earnings of MedTech Majors at a Glance

Other top-ranked stocks in the broader medical space, which also reported solid earnings this season, are Intuitive Surgical, Inc (ISRG - Free Report) and Illumina, Inc (ILMN - Free Report) and Integer Holdingd Corporation (ITGR - Free Report) .

Notably, each of the stocks sports a Zacks Rank #1 (Strong 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.

Illumina reported adjusted earnings of $1.43 per share, beating the consensus mark of $1.11.

Integer Holdings reported adjusted earnings of $1.06 per share in the second quarter of 2018, beating the Zacks Consensus Estimate of 90 cents.

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