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Why Is Inspire (INSP) Down 7.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Inspire Medical Systems (INSP). Shares have lost about 7.3% in that time frame, underperforming the S&P 500.

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

Inspire Medical Q1 Earnings Beat, Gross Margin Up

Inspire Medical delivered a loss per share of 34 cents in first-quarter 2024, narrower than the year-ago period’s loss of 53 cents per share. The metric was also narrower than the Zacks Consensus Estimate of a loss of 63 cents per share.

Revenues in Detail

Inspire Medical registered revenues of $164 million in the first quarter, up 28.2% year over year. The figure beat the Zacks Consensus Estimate by 1.5%.

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Per management, the top-line growth was driven by increased market penetration in existing centers, expansion into new territories and increased physician and patient awareness of the Inspire therapy. The top line also benefited from strength in U.S. revenues and revenues outside the United States.

Segment Details

Inspire Medical’s operations consist of two geographic regions — the United States and All other countries.

For the quarter under review, U.S. revenues of $155.8 million reflected an increase of 25% from the year-ago quarter on a reported basis. Per management, this upside reflects an increased position in patient awareness, increased market penetration in existing centers and expansion into new implanting centers in the United States and new U.S. sales territories.

During the reported quarter, Inspire Medical activated 66 new U.S. centers, thus bringing the total to 1,246 U.S. medical centers providing Inspire therapy. The company also created 11 new U.S. sales territories in the quarter, bringing the total to 298 U.S. sales territories.

Revenues from outside the United States totaled $8.2 million, up 141% year over year on a reported basis. This was primarily driven by a strong rebound in Europe, especially in Germany, since receiving derogation late in the fourth quarter.

Margin Analysis

In the first quarter, Inspire Medical’s gross profit increased 28.9% to $139.3 million. The gross margin expanded 46 basis points to 84.9%.

SG&A expenses jumped 23.2% to $125.6 million. R&D expenses increased 13.1% year over year to $28.9 million. Operating expenses of $154.5 million increased 21.1% year over year.

Operating loss totaled $15.2 million, narrower than the prior-year quarter’s operating loss of $19.5 million.

Financial Position

Inspire Medical exited first-quarter 2024 with cash and cash equivalents and short-term investments of $441.4 million compared with $460.4 million at 2023-end.

Net cash provided by operating activities at the end of first-quarter 2024 was $8.9 million against net cash used in operating activities of $1.3 million a year ago.

Outlook

Inspire Medical has revised its outlook for 2024. It has also initiated its earnings per share guidance for the same period.

The company now projects revenues in the range of $783 million-$793 million (representing growth of 25-27% from 2023 levels), up from the previous outlook of $775 million-$785 million (reflecting growth of 24-26% from 2023 levels). The Zacks Consensus Estimate is pegged at $782.9 million.

Inspire Medical reiterated its plans to open 52-56 new U.S. medical centers providing Inspire therapy and add 12-14 new U.S. sales territories during each quarter of 2024.

The company expects its earnings per share for 2024 between 10 and 20 cents.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted 28.28% due to these changes.

VGM Scores

At this time, Inspire has a nice Growth Score of B, however its Momentum Score is doing a bit 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 B. 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. Notably, Inspire has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Inspire belongs to the Zacks Medical Info Systems industry. Another stock from the same industry, Omnicell (OMCL), has gained 1.9% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Omnicell reported revenues of $246.15 million in the last reported quarter, representing a year-over-year change of -15.3%. EPS of $0.03 for the same period compares with $0.39 a year ago.

For the current quarter, Omnicell is expected to post earnings of $0.21 per share, indicating a change of -63.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +20% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Omnicell. Also, the stock has a VGM Score of B.

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Inspire Medical Systems, Inc. (INSP) : Free Stock Analysis Report

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