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Insulet (PODD) Q2 Earnings Beat Estimates, 2020 View Up

Insulet Corporation PODD announced second-quarter 2020 earnings per share (EPS) of 22 cents in contrast to the Zacks Consensus Estimate of a loss of a penny per share. The reported figure also marked a stupendous rise from the year-ago EPS of 2 cents.

Revenues in Detail

Revenues in the second quarter totaled $226.3 million, beating the Zacks Consensus Estimate by 6.8%. Moreover, the top line jumped 27.8% from the year-ago number (up 28.8% at constant exchange rate or CER).

Segment in Detail

Insulet delivered second-quarter total Omnipod revenues of $202 million, reflecting an increase of 25.6% year over year (up 26.8% at CER).

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International Omnipod revenues of $73.2 million were up 19.7% at CER exceeding the company’s expectation of 15% to 19% growth at CER. The revenue uptick included a benefit of approximately $2 million of channel inventory build due to COVID-19 and to a lesser extent better-than-expected new Omnipod starts.

Insulet Corporation Price, Consensus and EPS Surprise

Insulet Corporation Price, Consensus and EPS Surprise
Insulet Corporation Price, Consensus and EPS Surprise

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

U.S. Omnipod revenues grew 31.3% year over year to$128.8 million.

The Drug Delivery business revenues totaled $24.3 million, up 49.1% year over year exceeding the company’s expectation of $20 million for the second quarter. This was primarily a result of a shift in production timing from the first quarter to the second.

Margins

Gross profit in the reported quarter was $142.5 million, up 22.4% from the prior-year quarter. However, gross margin of 62.9% contracted 276 basis points (bps). According to the company, this included roughly a 180-bps impact due to COVID-19-related safety and mitigation costs.

Meanwhile, selling, general & administrative expenses rose 6.6% to $80.8 million. Research and development expenses went up 3.6% year over year to $34.2 million. Operating expenses of $115 million rose 5.7% year over year.

Operating profit totaled $27.5 million, reflecting a 261.8% rise from the prior-year quarter. Further, adjusted operating margin in the second quarter expanded 786 bps to 12.2%.

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 anticipates the pandemic and the recessionary headwinds to persist throughout 2020, with an estimated gradual recovery starting in the third quarter.

Overall, for the year, total revenues are expected to grow in the band of 17%-19% at CER (an increase from 15% expectation stated earlier). The Zacks Consensus Estimate for total revenues is pegged at $849 million.

Total Omnipod revenues are likely to grow 18%-20% at CER (the previously-provided guidance was 18%). U.S. Omnipod revenue growth is expected in the range of 19%-20% (19%). Further, International Omnipod revenue growth is likely to be 17%-19% at CER (an increase from the earlier-provided 16% growth projection). Drug Delivery revenues are expected to rise in the band of 3% to 6%(earlier was expected to decline around the mid-point of 15-20%).

For the third quarter of 2020, Insulet projects revenue growth of 13-15% at CER. The Zacks Consensus Estimate for revenues is pegged at $212.3 million.

Total Omnipod revenues are expected to grow 12-14%.  U.S. Omnipod revenues are likely to expand 14-16% at CER, whereas International Omnipod revenue growth is projected in the range of 9-11% at CER. Revenues in the Drug Delivery segment are expected to grow 23-28%.

Our Take

Insulet exited the second quarter on a strong note, thanks to the year-over-year improvement in revenues on the solid uptake of the Omnipod system, both in the United States and the international markets. This stupendous growth amid the crisis was primarily due to record revenue growth in total Omnipod product line along with growth other segments. 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.

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 margin 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 West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Hologic, Inc. HOLX.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25, beating the Zacks Consensus Estimate by 37.4%. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, a Zacks Rank #1 company, reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

Hologic reported third-quarter fiscal 2020 adjusted EPS of 75 cents, surpassing the Zacks Consensus Estimate by a stupendous 108.3%. Net revenues of $822.9 million exceeded the Zacks Consensus Estimate by 37.1%. It currently sports a Zacks Rank #1.

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Hologic, Inc. (HOLX) : Free Stock Analysis Report
 
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Insulet Corporation (PODD) : Free Stock Analysis Report
 
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