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DexCom (DXCM) Down 11.6% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for DexCom (DXCM - Free Report) . Shares have lost about 11.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is DexCom due for a breakout? 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 Q3 Earnings & Revenues Beat, International Sales Rise Y/Y

DexCom reported adjusted earnings of 17 cents per share in the third quarter of 2018, beating the Zacks Consensus Estimate of a loss of 12 cents. Also, the figure improved from a loss of 4 cents in the year-ago quarter.

Total revenues rallied 44.5% to $266.7 million on a year-over-year basis.

The figure surpassed the Zacks Consensus Estimate of $242 million.

Segmental Details

Revenues in the Sensor segment (73% of total revenues) surged 47% on a year-over-year basis to $194 million. Transmitter revenues (18%) increased 27% year over year to $48.5 million. Receiver revenues (9%) rallied 68% year over year to $24.2 million.

Geographical Details

U.S. revenues (76% of total revenues) surged 34% on a year-over-year basis to $202.4 million. International revenues (24%) rocketed 93% year over year to $64.3 million.

Operational Details

Gross Profit in the quarter totaled $168.6 million, up 32.8% year over year.

DexCom generated gross margin (as a percentage of revenues) of 63.2%, which contracted 560 basis points (bps) year over year. Margins were under pressure due to an inventory change as well as shift toward OUS and Medicare.

Research and development (R&D) expenses totaled $50.1 million in the quarter, up 15.7% year over year. Selling, general and administrative expenses totaled $104.6 million in the reported quarter, up 24.2% year over year.

The company reported net operating expenses of $154.7 million, up 21% year over year. As a percentage of revenues, DexCom generated operating margin of 5.2% in the third quarter.

Guidance

DexCom expects revenues of $975 million, up from the previous projection of $925 million.

Reported operating expenses, excluding investments in non-intensive programs, are expected to increase 18% from 2017 level. The estimate is significantly higher than the previous forecast of 14%.

However, gross profit margin is projected to be 64%, in line with the prior guidance.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 1888.31% due to these changes.

VGM Scores

At this time, DexCom has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise DexCom has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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