Few things will both propel a stock and obliterate expectations during a time when the rest of the industry is struggling. DexCom (DXCM 2.89%), maker of continuous blood glucose monitors that free diabetics from pricking their fingers, has done that with each earnings report in 2020, and shares have risen 98%, making it the third-best performer in the S&P 500 Index.
As the COVID-19 pandemic was beginning to unfold in the first quarter, DexCom crushed expectations by growing revenue 44% and reporting non-generally accepted accounting principles (GAAP) earnings per share (EPS) of $0.44, compared with a loss in the period a year earlier. Second-quarter results, reported on July 28, also humbled a few analysts when the company posted 34% top-line growth and EPS of $0.79. The consensus estimate was for revenue growth of 24% and EPS of $0.35.
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The advantage of continuous glucose monitors (CGMs) is not only convenience but better control of glucose levels around the clock and therefore better health for diabetes patients, a big reason why insurance payers are getting on board to cover them. New patient starts and highly satisfied customers are driving growth of its latest line of CGMs, the G6, and design improvements are taking costs out and raising gross margin.
DexCom's outlook for the rest of 2020 and 2021 is excellent. The pandemic caused about a 25% decrease in patient starts in Q2. Although the company is planning for that situation to continue, eventually new patient acquisition will rebound. Next year, the company will unveil its next-generation CGM, the G7, which should give results another boost.
DexCom reinstated full-year guidance in Q2, raising its earlier estimate of 17% to 20% revenue growth to 25% and giving investors more reason to own shares of this successful growth stock.
