DexCom (DXCM) Meets Q1 Earnings Estimates, Raises ’18 View

DexCom, Inc. DXCM reported loss of 32 cents per share in the first quarter of 2018, in line with the Zacks Consensus Estimate. Also, the figure was narrower than the loss of 49 cents reported in the year-ago quarter. The stock has a Zacks Rank #3 (Hold).

Total revenues grew 29.6% to $184.4 million from $142.3 million in the year-ago quarter. Revenues surpassed the Zacks Consensus Estimate of $173 million.

Segmental Details

Sensor revenues & other revenues (72% of total revenues) grew 30% on a year-over-year basis to $131.9 million. Transmitter revenues (20%) increased 28% from the prior-year quarter’s tally to $37.7 million. Receiver revenues (8%) grew 26% year over year to $14.8 million.

DexCom, Inc. Price, Consensus and EPS Surprise

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DexCom, Inc. Price, Consensus and EPS Surprise | DexCom, Inc. Quote

Operational Details

DexCom generated gross margin (as a percentage of revenues) of 64.5%, which contracted 160 basis points (bps) year over year. Margins were under pressure due to an inventory change and shift toward OUS and Medicare.

International business displayed continued growth in the quarter, up 49% on a year-over-year basis.

Research and development (R&D) expenses totaled $44.8 million in the quarter, down 6.9% year over year.

Selling, general and administrative expenses totaled $104.8 million in the reported quarter, increasing 21.3% year over year.

Guidance

DexCom raised full-year 2018 guidance.

The company expects 2018 revenues in the range of $850-$860 million, up from the previous range of $830-$850 million. Meanwhile, the Zacks Consensus Estimate for revenues is currently pegged at $843.7 million, which is significantly lower than the guided estimate.

Gross profit margin is projected in the band of 65% to 68%.

Reported operating expenses, excluding investments in non-intensive programs, is expected to increase 10% from 2017.

In Conclusion

DexCom’s first-quarter 2018 adjusted earnings met the Zacks Consensus Estimate. Solid contribution from Sensor revenues, Transmitter revenues and Receiver revenues are key catalysts at the moment. The glucose monitoring market represents significant commercial opportunity for DexCom. DexCom’s opportunities in alternative markets such as the non-intensive diabetes management space, the hospital, gestational, pre-diabetes and obesity are likely to provide the company a competitive edge in the MedTech space. Further, the company’s next-generation fully-disposable CGM systems is also in progress

On the flip side, cutthroat competition in the market for blood & glucose monitoring devices is a headwind for DexCom at the moment. We believe the company’s margins will continue to be under pressure in the coming quarters, owing to high product development costs and rising expenditures on research & development. Lower expected margins on transmitter sales are also a cause of concern.

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