Inogen (INGN) Beats Earnings And Revenue Estimates In Q1

Goleta, CA-based Inogen Inc. (NASDAQ:INGN) reported first-quarter 2017 earnings of 27 cents per share, which comfortably beat the Zacks Consensus Estimate and the year-ago figure of 12 cents.

The upside was driven by roughly 22.1% growth in revenues, which totaled $52.5 million, beating the Zacks Consensus Estimate of almost $49.6 million.

Segment Details

Sales revenues surged 40.1% to $46 million, while rental revenues plunged 35.8% to $6.5 million.

Business-to-business: Business-to-business domestic sales were up 84.2% on a year-over-year basis to almost $17.4 million, primarily driven by traditional home medical equipment provider purchases and the consistent strength of the private label partner.

Meanwhile, business-to-business International sales rose around 14.6% to almost $11.4 million on the back of solid demand.

Direct-to-consumer: Direct-to-consumer domestic sales advanced 27.8% to almost $17 million.

However, direct-to-consumer rental sales fell 35.8% to $6.5 million.

Margin Details

In the reported quarter, Inogen registered a gross margin of 49% (as a percentage of revenues), down 50 basis points (bps) on a year-over-year basis.

Meanwhile, sales gross margin expanded 260 bps in the quarter to 52.3%, as a percentage of revenues. Per management, an increase in sales gross margin was driven by lower cost of goods sold in the quarter.

Rental gross margin was 25.9% in the reported quarter, much lower than 48.9% in the first quarter of 2016. This was primarily driven by lower net revenue per rental patient.

Adjusted EBITDA rose 34% to $10.9 million on a year-over-year basis.

Guidance

Inogen reiterated its 2017 revenue and adjusted EBITDA guidance. However, the company raised its full-year adjusted net income guidance.

Inogen projects revenues in the range of $233–$239 million, higher than the previous range of $230–$236 million. This represents year-over-year growth of 14.9%–17.8%. The company expects rental revenue to decline in 2017, courtesy of lower average rental revenue per patient.

Adjusted EBITDA is projected in the band of $46–$50 million, representing an increase of 6%–15.2% year over year.

Inogen expects adjusted net income in the range of $22 million to $24 million, up from the previously provided range of $21–$23 million. This represents 7.2%–17% year-over-year growth.

Our Take

Inogen reported a stellar first quarter of 2017, beating the Zacks Consensus Estimate for both the counts. The company witnessed solid growth in revenues and adjusted earnings on a year-over-year basis. In our view, solid domestic and international business-to-business sales has driven the stellar quarterly performance. In fact, the company expects direct-to-consumer sales to be its fastest growing channel, followed by domestic business-to-business sales in the coming quarters, with solid focus in Europe.

However, falling rental revenues raise concern, which might mar the company’s prospects going ahead.

Key Picks

Inogen has a Zacks Rank #4 (Sell).

Better-ranked stocks in the broader medical sector include Neovasc Inc. (NASDAQ:NVCN) , Hologic, Inc. (NASDAQ:HOLX) and Sunshine Heart Inc (NASDAQ:SSH) . Notably, Neocasc sports a Zacks Rank #1(Strong Buy), while Hologic and Sunshine Heart carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Neovasc has a solid return of 24.3% for the last three months.

Hologic has a long-term expected earnings growth rate of 11.33%. The stock has a solid one-year return of roughly 33.4%.

Sunshine Heart posted a positive earnings surprise of 58.24% in the last reported quarter. The stock recorded a stellar EPS growth rate (last 3–5 years of actual earnings) of almost 22%.

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