DexCom (DXCM) Down 3.3% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for DexCom (DXCM). Shares have lost about 3.3% in that time frame, outperforming 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 catalysts.

DexCom Q4 Earnings and Revenues Surpass Estimates

DexCom, Inc. reported adjusted earnings of $1.15 per share in fourth-quarter 2019, which surpassed the Zacks Consensus Estimate of 75 cents by 53.3%. Moreover, the bottom line soared 105.4% from the prior-year quarter.

Total revenues surged 36.9% to $462.8 million on a year-over-year basis and also beat the Zacks Consensus Estimate by 1.3%. Rising volumes across all channels, strong new patient additions and increasing global awareness of the benefits of real-time CGM contributed to the upside.

2019 at a Glance

In 2019, the company reported revenues worth $1.48 billion, which improved 43.1% from the previous year. The top line also beat the Zacks Consensus Estimate by 2.1%.

Adjusted EPS for the year was $1.84, which improved significantly from that of 2018. The figure also surpassed the consensus mark by 28.7%.

Segmental Details

Revenues at the Sensor segment (78% of total revenues) surged 42.2% on a year-over-year basis to $359.5 million. Transmitter revenues (19%) improved 45.9% year over year to $86.1 million. Receiver revenues (4%) declined 34.6% year over year to $17.2 million.

Geographical Details

U.S. revenues (81% of total revenues) climbed 33.8% on a year-over-year basis to $375.9 million. International revenues (19%) surged 52.5% year over year to $86.9 million.

Margin Analysis

Gross profit in the quarter under review totaled $309.3 million, up 38.8% year over year. However, DexCom generated gross margin (as a percentage of revenues) of 66.8%, which expanded 90 bps year over year.

Research and development (R&D) expenses amounted to $78.8 million in the quarter, up 36.8% year over year. Selling, general and administrative expenses totaled $129 million in the reported quarter, up 15.1% year over year.

The company reported total operating expenses of $207.8 million, down 46.4% year over year.

The company reported operating income of $101.5 million, against the year-ago quarter’s operating loss of $164.9 million.

Financial Position

As of Dec 31, 2019, DexCom had $1.53 billion in cash and marketable securities.

Total cash and cash equivalents came in at $446.2 million, which plunged 60.8% from the prior-year quarter.

2020 Guidance

DexCom expects revenues to range between $1.73 billion and $1.78 billion. The Zacks Consensus Estimate for revenues is currently pegged at $1.75 billion.

Gross profit margin is projected to be around 64% of net revenues.

While adjusted operating margin is expected to be about 13% of net revenues, adjusted EBITDA margin is anticipated to be 23%.

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 67.87% due to these changes.

VGM Scores

Currently, DexCom has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 trending upward for the stock, and the magnitude of this revision has been net zero. It comes with little surprise DexCom has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.