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Insulet (PODD) Q1 Earnings Lag Estimates, Margins Decline

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Insulet Corporation (PODD - Free Report) announced first-quarter 2020 loss per share of 3 cents, declining from year-ago earnings per share (EPS) of 7 cents. The loss was wider than the Zacks Consensus Estimate by a penny.

Revenues in Detail

Revenues in the first quarter totaled $198 million, beating the Zacks Consensus Estimate by 4.8%. Moreover, the top line jumped 24.1% from the year-ago number.

Segment in Detail

Insulet delivered first-quarter U.S. Omnipod revenues of $116.6 million, reflecting an increase of 35.4% year over year.

International Omnipod revenues of $73.1 million were up 28.5% (31.9% in constant exchange rate or CER). The revenue uptick resulted from orders from customer who were stocking up in response to the coronavirus uncertainties.

Total Omnipod revenues were $189.7 million, up 32.7% (34% in CER).

Insulet Corporation Price, Consensus and EPS Surprise

 

Insulet Corporation Price, Consensus and EPS Surprise

Insulet Corporation price-consensus-eps-surprise-chart | Insulet Corporation Quote


The Drug Delivery business revenues totaled $8.3 million, down 50% year over year. This was primarily a result of a shift in production timing.

Margins

Gross profit in the reported quarter was $126.9 million, up 18.9% from the prior-year quarter. However, gross margin of 64.1% contracted 276 basis points (bps). According to the company, this included roughly a 160-bp impact due to COVID-19-related safety and mitigation costs.

Meanwhile, selling, general & administrative expenses rose 25.4% to $83.9 million. Research and development expenses went up 9.2% year over year to $35.5 million. Adjusted operating expenses of $119.4 million rose 20.1% year over year.

Adjusted operating profit totaled $7.5 million, reflecting a 2.7% rise from the prior-year quarter. Further, adjusted operating margin in the first quarter plunged 79 bps to 3.8%.

2020 Guidance

Insulet has provided an update to its earlier-stated guidance for 2020 despite the uncertainties related to the extent and duration of business disruptions due to the pandemic. The company is anticipating a pronounced impact on new global Omnipod starts in the second quarter. It is also expecting the pandemic and recessionary headwinds to persist throughout 2020, with an estimated gradual recovery starting the third quarter.

Overall, for the year, total revenues are expected to grow 15% at CER, which is at the low end of its previously-stated total revenue growth range of 15-19% at CER. The Zacks Consensus Estimate for total revenues is pegged at $838.9 million.

Total Omnipod revenues are likely to grow 18% at CER, which is at the low end of the previously-provided range of 18-22%. U.S. Omnipod revenue growth is expected at 19%, which is near the low end of the previously-provided range of 18-22%. Further, International Omnipod revenue growth is likely to be 16% at CER, unlike the earlier-provided range of 18-22%. Drug Delivery revenues are expected to decline around the middle of the previously-provided range of 15-20%.

For the second quarter of 2020, Insulet projects revenue growth of 19-23% at CER. The Zacks Consensus Estimate for revenues is pegged at $202.4 million.

Total Omnipod revenues are expected to grow 19-23%.  U.S. Omnipod revenues are likely to expand 21-25% at CER, whereas International Omnipod revenue growth is projected at 15-19% at CER. However, revenues in the Drug Delivery segment are expected to grow 18-22%.

Our Take

Insulet exited the first quarter on a mixed note. The year-over-year improvement in revenues on the solid uptake of the Omnipod system, both in the United States and international markets, looks encouraging. The momentum of Omnipod DASH is encouraging based on the solid uptake in geographies in which it has been launched. The company’s plans of geographical expansion buoy optimism.

The company’s efforts to minimize supply disruptions during the pandemic are noteworthy. The sales calls are being conducted through Webex. The manufacturing and supply teams are ensuring that the growing customer demand is met with minimum disruptions. It has also broadened its financial assistance program to ensure that customers who rely on Omnipod will be able to continue using it even if they lose insurance coverage.

However, we are concerned about the slowdown in new Omnipod starts globally since March due to the deferral of non-emergency physician visits due to COVID-19. Contraction in gross and operating margins along with a sharp decline in first-quarter earnings is discouraging as well. Also, Insulet is exposed to risks associated with a weaker global economy and lower reimbursement rates.

Zacks Rank and Stocks to Consider

Insulet currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Aphria Inc. (APHA - Free Report) , Biogen Inc. (BIIB - Free Report) and Eli Lilly and Company (LLY - Free Report) .

Aphria reported third-quarter fiscal 2020 adjusted EPS of 2 cents, comparing favorably with the Zacks Consensus Estimate of a loss of 4 cents. Net revenues of $64.4 million outpaced the consensus estimate by 14.6%. The company carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Biogen currently carries a Zacks Rank #2. It reported first-quarter 2020 adjusted EPS of $9.14, surpassing the Zacks Consensus Estimate by 18.1%. Revenues of $3.53 billion outpaced the consensus mark by 3.2%.

Eli Lilly delivered first-quarter 2020 EPS of $1.75, outpacing the Zacks Consensus Estimate by 12.9%. Revenues of $145.3 million surpassed the consensus estimate by 6.3%. The company currently sports a Zacks Rank #1.

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