DexCom, Inc. (NASDAQ:DXCM) 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.
The stock sports a Zacks Rank #1 (Strong Buy).
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 raised 2018 guidance.
The company expects revenues of $975 million, up from the previous projection of $925 million. Meanwhile, the Zacks Consensus Estimate for revenues is currently pegged at $967.4 million, which is significantly lower than the guidance.
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.
Wrapping Up
DexCom exited the third quarter on a strong note, beating the Zacks Consensus Estimate for earnings and revenues. Impressive contributions from the Sensor, Transmitter and Receiver segments are key catalysts. A raised guidance instills investors’ optimism. The glucose monitoring market presents significant commercial opportunity for DexCom. The company’s opportunities in alternative markets such as the non-intensive diabetes management space, the hospital, gestational, pre-diabetes and obesity are likely to provide it a competitive edge in the MedTech space.
On the flip side, cutthroat competition in the market for blood & glucose monitoring devices is a headwind. We believe that the company’s margins will continue to remain under pressure in the upcoming quarters, thanks to high product development costs and rising expenditures on the R&D front. Lower expected margins on transmitter sales are add to the concerns.
Q3 Earnings of MedTech Majors at a Glance
Other top-ranked stocks from the broader Medical space that delivered robust results this earnings season are Intuitive Surgical (NASDAQ:ISRG) , Stryker Corporation (NYSE:SYK) and Merit Medical Systems, Inc (NASDAQ:MMSI) . Notably, each of the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intuitive Surgical reported third-quarter 2018 adjusted earnings per share (EPS) of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, which outpaced the consensus mark of $918.6 million.
Stryker posted third-quarter 2018 adjusted EPS of $1.69, which outpaced the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 bps.
Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus mark of $218 million.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Intuitive Surgical, Inc. (ISRG): Free Stock Analysis Report
Stryker Corporation (SYK): Free Stock Analysis Report
DexCom, Inc. (DXCM): Free Stock Analysis Report
Merit Medical Systems, Inc. (MMSI): Free Stock Analysis Report
Original post
Zacks Investment Research