Technology

DexCom (DXCM) Down 0.3% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for DexCom (DXCM). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is DexCom due for a breakout? 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 drivers.

DexCom Q2 Earnings and Revenues Surpass Estimates

DexCom, Inc.’s second-quarter 2020 adjusted earnings of 79 cents per share surpassed the Zacks Consensus Estimate of 31 cents by 154.8%. Notably, the company reported earnings per share of 8 cents in the prior-year quarter.

Total revenues surged 34.4% to $451.8 million on a year-over-year basis and beat the Zacks Consensus Estimate by 11.1%. 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 (81% of total revenues) climbed 40% on a year-over-year basis to $364.5 million. Hardware revenues (19%) improved 14.9% year over year to $87.3 million.

Geographical Details

U.S. revenues (81% of total revenues) increased 37.8% on a year-over-year basis to $367.1 million. International revenues (19%) grew 20.8% year over year to $84.7 million.

Margin Analysis

Adjusted gross profit in the quarter under review totaled $289.7 million, up 40.3% year over year. DexCom generated adjusted gross margin (as a percentage of revenues) of 64.1%, which expanded 270 basis points (bps) year over year.

Research and development expenses amounted to $79.9 million in the quarter, up 15.8% year over year. Selling, general and administrative expenses totaled $136.4 million in the reported quarter, down 1.4% year over year.

The company reported total operating expenses of $216.3 million, up 4.3% year over year.

The company reported adjusted operating income of $76.7 million compared with $6.2 million in the prior-year quarter. Adjusted operating margin (as a percentage of revenues) of 17%, which expanded 1510 bps year over year.

Financial Position

The company exited the second quarter with $530 million in cash and cash equivalents, which grew 18.8% from year-end 2019.

2020 Guidance

DexCom has decided to reinstate its full-year 2020 guidance.  
The company expects revenues to be around $1.85 billion, reflecting growth of 25% from the previous year. Adjusted gross margin is anticipated to meet or exceed 65%, while adjusted operating margin is estimated to be 14% or higher.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 21.51% due to these changes.

VGM Scores

At this time, DexCom has a great Growth Score of A, a grade with the same score on the momentum front. 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, DexCom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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