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DexCom (DXCM) Up 16.5% 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 16.5% 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 catalysts.

DexCom Earnings and Revenues Beat Estimates in Q3

DexCom, Inc. reported adjusted earnings of 65 cents per share in third-quarter 2019, surpassed the Zacks Consensus Estimate of 18 cents by a huge mark. Moreover, the bottom line skyrocketed 261.1% from the prior-year quarter.

Total revenues surged 48.6% to $396.3 million on a year-over-year basis and also surpassed the Zacks Consensus Estimate by 13.5%. Rising volumes across all channels, strong new patient additions and increasing global awareness of the benefits of real-time CGM contributed to the upside.
 
Segmental Details


Revenues at the Sensor segment (80% of total revenues) surged 63.5% on a year-over-year basis to $317.2 million. Transmitter revenues (16%) improved 27.4% year over year to $61.8 million. Receiver revenues (4%) declined 28.5% year over year to $17.3 million.

Geographical Details

U.S. revenues (78% of total revenues) surged 52.6% on a year-over-year basis to $308.8 million. International revenues (22%) improved 36.1% year over year to $87.5 million.

Margin Analysis
 
Gross profit in the quarter under review totaled $246.9 million, up 46.4% year over year. However, DexCom generated gross margin (as a percentage of revenues) of 62.3%, which contracted 90 bps year over year.
 
Research and development (R&D) expenses amounted to $66.7 million in the quarter, up 33.1% year over year. Selling, general and administrative expenses totaled $124.2 million in the reported quarter, up 18.7% year over year.
 
The company reported total operating expenses of $190.9 million, up 23.4% year over year.

The company reported operating income of $56 million, compared with the year-ago quarter’s figure of $13.9 million.
 
Financial Position
 
As of Sep 30, 2019, DexCom had $1.43 billion in cash and marketable securities.
 
Total cash and cash equivalents came in at $395.6 million, down 44.2% sequentially.
 
2019 Guidance Revised
 
DexCom now expects revenues in the range of $1.43-$1.45 billion (up from the previously guided range of $1.33-$1.38 billion). The Zacks Consensus Estimate for revenues is currently pegged at $1.36 billion, which is below the lower end of the guided range.
 
Gross profit margin is projected to be around 63% compared with the prior estimated range of 64% to 65% of net revenues.

While adjusted operating margin is expected to be about 9% of net revenues (up from the previous projection of 7%), adjusted EBITDA margin is anticipated to be 19.5% (up from the prior estimate of 18.5%).

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, DexCom has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise DexCom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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