DexCom, Inc. DXCM is well-poised for growth in the coming quarters, backed by its strong product portfolio. A robust third-quarter 2022 performance, along with a series of favorable coverage decisions, is expected to contribute further. However, stiff competition and reimbursement risks persist.
In the past six months, this Zacks Rank #3 (Hold) stock has gained 42.5% compared with a 4% increase of the industry and against a 1% decline of the S&P 500.
This renowned medical devices company and provider of continuous glucose monitoring (CGM) systems has a market capitalization of $44.32 billion. The company projects 32.9% growth for the next five years and expects to maintain its strong performance. DexCom’s earnings surpassed the Zacks Consensus Estimate in one of the trailing four quarters, missed the same in two and matched estimates in one, delivering a negative earnings surprise of 10.07%, on average.
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Let’s delve deeper.
Strong Product Portfolio: We are upbeat about DexCom's continued strength in its CGM products. It launched an updated sensor algorithm in five countries during the third quarter, making the latest G7 sensor technology available for international markets. The company received FDA clearance for G7 sensor technology last month. The company, in August, announced the availability of the easy-to-use Dexcom ONE real-time CGM System on prescription via the NHS England, Wales, Scotland and Northern Ireland drug tariff to everyone with type 1 or type 2 diabetes using insulin.
DexCom’s prospects in alternative markets such as non-intensive diabetes management, hospital, gestational, pre-diabetes and obesity are likely to provide it a competitive edge in the MedTech space.
Positive Coverages: DexCom's products have been receiving increasing coverage over the past few months, raising our optimism. The company, in June, announced that people with type 1 and type 2 diabetes aged two years and above on multiple daily injections of insulin (three or more) or who use an insulin pump may now be eligible for public coverage of the Dexcom G6 CGM System via Prince Edward Island’s Diabetes Glucose Sensor Program.
The Ontario government started coverage for the Dexcom G6 CGM System through Ontario’s Assistive Devices Program for people with type 1 diabetes living in the province who are above the age of 2 years and meet coverage criteria in March.
Strong Q3 Results: DexCom’s solid third-quarter 2022 revenues buoy optimism. Rising volumes across all channels, along with strong new customer additions, owing to increasing global awareness of the benefits of real-time CGM, contributed to the upside. Impressive contributions from the Sensor segment and domestic and international revenue growth were key catalysts. DexCom also received CE Mark for an updated sensor algorithm, making the latest G7 sensor technology available in international markets.
Downsides
Rising Costs: DexCom's gross margin contracted during the third quarter, reflecting the rising cost of sales. The company also lowered the 2022 guidance for adjusted gross margin.
Stiff Competition: The market for blood glucose monitoring devices is highly competitive, subject to rapid change and significantly affected by new product introductions. DexCom’s competitors manufacture and market products for the single-point finger stick device market and collectively account for substantially all worldwide sales of self-monitored glucose testing systems, currently.
Estimate Trend
DexCom is witnessing a stable estimate revision trend for 2023. In the past 30 days, the Zacks Consensus Estimate for its earnings has remained unchanged at $1.06.
The Zacks Consensus Estimate for the company’s fourth-quarter 2022 revenues is pegged at $805.5 million, suggesting a 15.4% improvement from the year-ago quarter’s reported number. The same for earnings per share stands at 26 cents, implying 52.9% growth year over year.
DexCom, Inc. Price
DexCom, Inc. price | DexCom, Inc. Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Mesa Laboratories MLAB and Cardinal Health CAH.
AMN Healthcare, sporting a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.96%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has gained 52.7% compared with the industry’s 2.3% increase in the past six months.
Mesa Laboratories, sporting a Zacks Rank #1 at present, has an estimated growth rate of 28.9% for fiscal 2023. MLAB’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average beat being 16.56%.
Mesa Laboratories has declined 15.9% against the industry’s 2.2% increase in the past six months.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.2%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average beat being 3.04%.
Cardinal Health has gained 46.8% compared with the industry’s 4.1% increase over the past six months.
(We are reissuing this article to correct a mistake. The original article, issued on January 5, 2023, should no longer be relied upon.)
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