DexCom (DXCM) Q3 Earnings Beat Estimates, Guidance Revised

DexCom, Inc. DXCM reported third-quarter 2022 adjusted earnings per share (EPS) of 28 cents, beating the Zacks Consensus Estimate of 24 cents by 16.7%. The bottom line also improved 27.3% on a year-over-year basis.

GAAP net income per share in the quarter was 24 cents, compared with the year-ago quarter’s figure of 21 cents per share.

Revenue Details

Total revenues grew 18% (20% on an organic basis) to $769.6 million on a year-over-year basis and beat the Zacks Consensus Estimate by 2.2%. Rising volumes across all channels, along with strong new customer additions, owing to increasing global awareness of the benefits of real-time Continuous Glucose Monitoring (CGM), contributed to the upside.

Segmental Details

Revenues at the Sensor and other revenues segment (87% of total revenues) climbed 21.7% on a year-over-year basis to $666.6 million. Hardware revenues (13%) increased 0.7% year over year to $103 million.

Geographical Details

U.S. revenues (75% of total revenues) increased 17.1% on a year-over-year basis to $573.4 million. International revenues (25%) improved 22.2% year over year to $196.2 million.

Margin Analysis

Gross profit in the quarter under review totaled $494.2 million, up 10.6% year over year. DexCom generated a gross margin (as a percentage of revenues) of 64.2%, which contracted 450 basis points (bps) year over year.

Research and development expenses amounted to $110.3 million in the quarter, down 14.4% year over year. Selling, general and administrative expenses totaled $234.6 million in the reported quarter, up 18.2% year over year.

DexCom, Inc. Price, Consensus and EPS Surprise

DexCom, Inc. Price, Consensus and EPS Surprise

DexCom, Inc. price-consensus-eps-surprise-chart | DexCom, Inc. Quote

The company reported total operating expenses of $346.7 million, up 5.5% from the prior-year figure. Operating margin (as a percentage of revenues) of 19.2% expanded 100 bps year over year.

Financial Position

The company exited the third quarter with $2.37 billion in cash, cash equivalents and marketable securities, compared with $2.75 billion in the preceding quarter.

Total assets in the third quarter amounted to $4.9 billion, compared with $5.2 billion on a sequential basis.

2022 Guidance Updated

DexCom raised the lower end of its revenue guidance for 2022 and expects revenues to be in the range of $2.88-$2.91 billion compared with the previous range of $2.86-$2.91 billion. The Zacks Consensus Estimate for the same stands at $2.89 billion.

The company lowered the 2022 guidance for adjusted gross margin while maintaining the same for adjusted operating margin.

While the adjusted gross margin is anticipated to be about 64% (down from 65% previously expected), the adjusted operating margin is estimated to be around 16%.

Wrapping Up

DexCom exited third-quarter 2022 on a strong note, wherein earnings and revenues beat the Zacks Consensus Estimate. Impressive contributions from the Sensor segment and domestic and international revenue growth were the key catalysts.

Additionally, the glucose monitoring market presents significant commercial opportunities for the company. DexCom’s prospects in alternative markets such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it a competitive edge in the MedTech space.

Apart from making continued advancements with respect to key strategic objectives, DexCom ended the quarter with new patient additions as well. It launched an updated sensor algorithm in five countries during the third quarter, making the latest G7 sensor technology available to international markets. The company anticipates FDA clearance for G7 sensor technology before the end of 2022. These developments are likely to support the future growth of the company.

Nevertheless, the contraction in gross margin is a woe, reflecting the rising cost of sales. Apart from this, cut-throat competition in the market for blood & glucose monitoring devices remains a concern.

Zacks Rank and Stocks to Consider

Currently, DexCom carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health, Inc. ELV, Medpace Holdings, Inc. MEDP and Accuray ARAY.

Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Elevance Health has an earnings yield of 5.5% against the industry’s (2.3%). ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.

Medpace Holdings, having a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $384 million outpaced the consensus mark by 8.1%.

Medpace Holdings has an estimated growth rate of 22.7% for 2022. MEDP’s earnings surpassed estimates in the trailing four quarters, the average being 22.04%.

Accuray reported fourth-quarter fiscal 2022 adjusted loss per share of 4 cents, which surpassed the Zacks Consensus Estimate by 33.3%. Fourth-quarter revenues of $110 million outpaced the Zacks Consensus Estimate by 4.9%. It currently has a Zacks Rank #2.

Accuray has an estimated growth rate of 100% for fiscal 2023. ARAY’s earnings surpassed estimates in three of the trailing four quarters and lagged the same in one, the average surprise being 20.8%.

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