DexCom (DXCM) Up 4.1% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for DexCom (DXCM). Shares have added about 4.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is DexCom due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

DexCom Q1 Earnings and Revenues Surpass Estimates

DexCom, Inc. reported adjusted earnings of 44 cents per share in first-quarter 2020, which comfortably surpassed the Zacks Consensus Estimate of 10 cents. Notably, the company has reported a loss per share of 5 cents in the prior-year quarter.

Total revenues surged 44.4% to $405.1 million on a year-over-year basis and also beat the Zacks Consensus Estimate by 14%. Rising volumes across all channels, strong new patient additions and 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 revenue segment (80% of total revenues) surged 53.4% on a year-over-year basis to $325 million. Hardware revenues (20%) improved 16.8% year over year to $80.1 million.

Geographical Details

U.S. revenues (81% of total revenues) increased 38.9% on a year-over-year basis to $292.3 million. International revenues (19%) surged 61.1% year over year to $112.8 million.

Margin Analysis

Gross profit in the quarter under review totaled $256.5 million, up 51.9% year over year. However, DexCom generated gross margin (as a percentage of revenues) of 63.3%, which expanded 310 bps year over year.

Research and development expenses amounted to $73.1 million in the quarter, up 23.9% year over year. Selling, general and administrative expenses totaled $149.8 million in the reported quarter, up 20.6% year over year.    

The company reported total operating expenses of $222.9 million, up 21.7% year over year.

The company reported operating income of $33.6 million, against the year-ago quarter’s operating loss of $14.4 million.

Financial Position

The company exited the first quarter with $584.6 million in cash and cash equivalents, which surged 31% from year-end 2019.

2020 Guidance

The company has decided to suspend full-year 2020 guidance (issued previously on Feb 13, 2020) on account of the uncertainty with respect to the duration and impact of the COVID-19 pandemic.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, DexCom has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise DexCom has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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