Inogen Inc.'s INGN first-quarter 2018 results are scheduled for release on Apr 30, after the market closes . A broadening Long-term Oxygen Therapy ("LTOT") market, inherent benefits of Portable Oxygen Concentrators ("POC") over traditional delivery model, direct-to-customer business model, underpenetrated international markets and expanding product portfolio are key growth catalysts.
Notably, in the last quarter, Inogen reported adjusted earnings of 31 cents per share, beating the Zacks Consensus Estimate by 47.6%. Earnings increased 24% on a year-over-year basis. Total revenues in the reported quarter rose 25.4% to $63.8 million on a year-over-year basis. The figure beat the Zacks Consensus Estimate by 2.9%.
For the current quarter, the Zacks Consensus Estimate for revenues is pegged at $62.6 million, reflecting a rise of 19.2% year over year. The Zacks Consensus Estimate for earnings is pegged at 27 cents.
Let's delve into other factors which are likely to impact Inogen's first-quarter 2018 results.
European Sales to Boost Q1 Top Line
Inogen has been one of the leading providers of POCs in Europe. In the last-reported quarter, sales in Europe represented 84.3% of international sales, up from 83.3% in the year-ago quarter.
We expect the trend to continue in the upcoming quarterly results. In fact, management expects long-term opportunity ahead as the market transitions from tank and liquid oxygen systems to non-delivery solutions.
Further, in support of its European customers, Inogen began the production of its Inogen One G3 concentrators in the fourth quarter of 2017 using a contract manufacturer, Foxconn, located in the Czech Republic.
In 2018, the company expects Foxconn to produce a huge number of Inogen One G3 concentrators required to support the massive European demand, with the first quarter being no exception.
Although Inogen is just in the first leg of its collaboration with Foxconn, the company has been already delivering improved service levels and lower costs.
We expect the company to deliver a solid first-quarter 2018 performance on the back of Inogen One concentrators and Inogen At Home concentrators.
Inogen, Inc Price and EPS Surprise
Other Factors at Play
For 2018, Inogen expect revenues in the range of $298 million to $308 million, up from the previously-issued range of $295 million to $305 million. Notably, this represents growth of 19.5% to 23.5% year over year. An upbeat trend is expected to continue in the quarter to be reported as well.
Inogen expects its direct-to-consumer sales to be the fastest growing channel, domestic business-to-business sales to have a significant growth rate and international business-to-business sales to have a modest growth rate where the strategy will still focus on the European market.
Inogen's direct-to-customer business model has lent it a leading position in the oxygen therapy market. The direct-to-consumer model gives companies an opportunity to build a unique brand relationship directly with customers. Recently, the company signed a lease for its expansion site in Ohio to accelerate growth in domestic direct-to-consumer sales channel. The growing direct-to-customer sales and marketing efforts help in increasing awareness among patients. Growth in physician referrals in this segment is expected to boost the top line over the long term.
In the fourth quarter of 2017, direct-to-consumer sales (domestic and international) increased 23.9% to $29.5 million on a year-over-year basis. The company's sales team consisted of 263 inside sales representatives as of Dec, 2017 which represented an increase of 86 reps over the 2016 year-end's total of 177. The company announced plans to execute a direct-to-consumer pricing trial in 2018 to ensure that its products are optimally priced.
A unique direct-to-consumer business model is likely to boost the company's first-quarter bottom line.
Dull Rental Revenues
Inogen derives a significant portion of its revenues from Medicare's service reimbursement programs. The company expects rental revenues per patient to decline in the upcoming quarters, due to lower reimbursement rates in connection with the nationalization of competitive bidding and continued reimbursement declines.
Rental revenues represented 8.5% of total revenues in the fourth quarter of 2017, lower than 16.2% of net revenues in the year-ago quarter. Rental revenues in the fourth quarter of 2017 were $5.4 million compared with $8.2 million in the fourth quarter of 2016, down 34.1% year over year. Per management, the decline was caused by a $2-million rental benefit in the year-ago quarter.
What Our Model Predicts
Our quantitative model does not predict an earnings beat for Inogen in the upcoming quarterly results.
This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. It can be illustrated below:
Earnings ESP for Inogen is -37.04%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Inogen carries a Zacks Rank #3.
Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
The Cooper Companies, Inc. COO has an Earnings ESP of +0.26% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .
Teleflex Incorporated TFX has an Earnings ESP of +0.58% and a Zacks Rank #3.
AbbVie Inc. ABBV has an Earnings ESP of +0.06% and a Zacks Rank #3.
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