Diabetes was the seventh-leading cause of death in America in 2019, claiming more than 87,000 lives. And the disease killed more than 100,000 Americans in 2021. According to the National Clinical Care Commission created by Congress, one in three Americans will develop the chronic disease in their lifetime if current trends persist.

The increasing prevalence of the disease is happening alongside the rising need to self-monitor and treat the disease due to the surge in risk factors, such as obesity, sedentary lifestyles, and a growing elderly population. That is why the diabetes care devices market is expected to grow at a 6.7% CAGR to $31.90 billion by 2028.

Diabetes stocks DexCom, Inc. (DXCM - Get Rating) was recently upgraded by research analysts at BTIG Research from a ‘neutral’ rating to a ‘buy’ rating, while Insulet Corporation (PODD - Get Rating) was upgraded from ‘neutral’ to ‘buy.’

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DexCom, Inc. (DXCM - Get Rating)

DXCM in San Diego, Calif., is a medical device company that focuses on designing, developing, and commercializing continuous glucose monitoring (CGM) systems worldwide. The company provides its systems for use by people with diabetes and healthcare providers.

On February 3, DXCM announced that people below the age of 18 with diabetes, who require the ongoing use of insulin and insulin pump therapy, would be eligible for public coverage of the Dexcom G6 CGM System through Alberta Health. Through this eligibility, as part of the Alberta Health Services coverage program, users are expected to order and pick up their Dexcom CGM supplies through their local pharmacy. This development might be profitable for the company. In September, DXCM announced that type 1 diabetes patients who are 25 years or younger were expected to be eligible for provincial coverage of the Dexcom G6 CGM System through Manitoba Health and Seniors Care, joining British Columbia, Saskatchewan, Yukon, and Quebec in offering public coverage of CGM systems under provincial health plans.

For its fiscal third quarter, ended September 30, DXCM’s revenues increased 29.8% year-over-year to $650.20 million. Its on-GAAP gross profit rose 31.2% from the prior-year quarter to $446.90 million, while its non-GAAP operating income came in at $123.80 million, up 30.3% from the same period the prior year.

The $0.52 consensus EPS estimate for the quarter, ending March 2022, indicates a 57.6% year-over-year increase. And the $641.75 million consensus revenue estimate for the same period reflects a 32.5% rise from the prior-year period. Furthermore, DXCM has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters.

The stock has gained 11.7% in price over the past year and 6.9% over the past five days to close yesterday’s trading session at $447.88.

Insulet Corporation (PODD - Get Rating)

PODD operates as a developer, manufacturer, and seller of insulin delivery systems for people with insulin-dependent diabetes. The Billerica, Mass.-based company offers its Omnipod System, a self-adhesive disposable tubeless Omnipod device, and wireless companion, the hand-held personal diabetes manager.

On January 28, PODD announced that it had received clearance from the U.S. Food and Drug Administration (FDA) for its Omnipod® 5 Automated Insulin Delivery System (Omnipod 5), a tubeless automated insulin delivery (AID) system, for individuals aged six years and older with type 1 diabetes. The approval for the device that has integrated DXCM’s Dexcom G6 CGM might generate significant returns for PODD.

PODD’s revenue increased 17.8% year-over-year to $275.60 million in its fiscal third quarter, ended September 30. Its gross profit improved 24.3% from the prior-year period to $188.70 million. Its net income and net income per share came in at $12.60 million and $0.18, respectively, up 8.6% and 5.9% from the prior-year quarter.

The Street’s $0.32 EPS estimate for the fourth fiscal quarter (ended December 2021) reflects a 223.1% year-over-year improvement. And the Street’s $301.06 million revenue estimate for the same period indicates a 22.3% rise from the same period the prior year.

Over the past month, the stock has gained 2.5% in price to close yesterday’s trading session at $256.35. It has gained 6% over the past five days.

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DXCM shares were trading at $442.34 per share on Thursday afternoon, down $5.54 (-1.24%). Year-to-date, DXCM has declined -17.62%, versus a -5.53% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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