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DexCom (DXCM) Up 15.8% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for DexCom (DXCM - Free Report) . Shares have added about 15.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is DexCom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

DexCom Beats Q2 Earnings Estimates, Sensor Segment Strong

DexCom, Inc. 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.

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.

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%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -56.37% due to these changes.

VGM Scores

At this time, DexCom has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, DexCom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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