DexCom (DXCM) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research
·5-min read

DexCom, Inc. DXCM is scheduled to release third-quarter 2020 results on Oct 27, after the closing bell. In the last reported quarter, the company delivered an earnings surprise of 154.8%. Further, it beat estimates in each of the trailing four quarters, the average surprise being 202.3%.

Q3 Estimates

Currently, the Zacks Consensus Estimate for third-quarter revenues is pegged at $474.1 million, suggesting growth of 19.6% from the year-ago reported figure. The consensus estimate for earnings is pegged at 64 cents per share, indicating a decline of 1.5% from the prior-year quarter.

Factors to Note

DexCom’s third-quarter top line is likely to reflect increase in volumes, courtesy of new patients across all channels, and rising global awareness regarding the benefits of its real-time Continuous Glucose Monitoring (CGM).

The company’s Insulet and Lilly diabetes management products have also been progressing well. Its commercial agreement with Eli Lilly was officially signed in December 2019. This underlined a significant step toward bringing their system to market with G6, which will initially focus on a smart pen offering.

DexCom, Inc. Price and EPS Surprise

DexCom, Inc. Price and EPS Surprise
DexCom, Inc. Price and EPS Surprise

DexCom, Inc. price-eps-surprise | DexCom, Inc. Quote

In January 2020, Tandem Diabetes launched its latest integrated pump offering — the Control-IQ system — integrating the DexCom G6 sensor and its type zero algorithm to automated insulin delivery. Interestingly, this is the first integrated system to provide automated correction boluses based on the customer CGM ratings in its AP algorithm.

Per the first-quarter 2020 earnings call, the FDA was quick to enable the use of DexCom CGM in the hospital setting and other healthcare facilities to lend support to COVID-19 healthcare related efforts, thereby further bolstering demand for the product.

On its first-quarter 2020 earnings call, the company announced that it continues to advance the regulatory pathway for use of CGM in pregnancy, obtaining CE Mark for wear on the back of the arm. Further, the company removed the pregnancy warning for G6 for use in Type 1, Type 2 and gestational diabetes. After the receipt of this approval, the company introduced G6 in the U.K. for pregnant women suffering from diabetes, while working toward widening the clinical evidence in order to support the use of DexCom CGM for gestational diabetes management.

In second-quarter 2020, the company made Dexcom CGM systems available in the United States for utilization in hospitals and other healthcare facilities in order to help frontline workers amid the COVID-19 pandemic. Further, the company received the CE mark for use of its G6 CGM system on the back of the upper arm.

These developments are anticipated to have positively impacted the company’s performance in the to-be-reported quarter.

DexCom has significant opportunity to capitalize on international markets backed by demographic trends and lifestyle in countries outside the United States and Europe. In fact, per management, the company will continue to strive toward market expansion and looks forward to the introduction of G6 in markets like Japan and South Korea later in 2020. Per the company, international growth remains strong and presents lucrative prospects on the back of improving global access and awareness. This, in turn, might have contributed to the third-quarter international revenues.

Improved operational discipline is likely to get reflected in the third-quarter operating margin.

However, increase in operating expenses and intense competition may have weighed on the to-be-reported quarter’s performance.

What Our Quantitative Model Suggests

Per our proven model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here as you will see.

Earnings ESP: DexCom has an Earnings ESP of +28.13%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #4 (Sell).

Stocks Worth a Look

Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

Stryker Corporation SYK has an Earnings ESP of +0.26% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo Corporation MASI has an Earnings ESP of +10.71% and a Zacks Rank of 3.

Pacific Biosciences of California, Inc. PACB has an Earnings ESP of +15.39% and a Zacks Rank of 3.

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