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Insulet's (PODD) Omnipod Sales Grow on New Product Upgrade

Insulet Corporation PODD is gradually improving with respect to seamless supply chain and manufacturing operations. Solid prospects of the diabetes market bode well for the company. The stock carries a Zacks Rank #2 (Buy).

Over the past year, Insulet has been outperforming its industry. The stock has gained 20.9% compared with the industry’s 3.2% rise. Insulet exited the second quarter of 2021 with better-than-expected revenues. The year-over-year improvement in the top line on solid uptake of the Omnipod system, both in the United States and international markets, was encouraging.

The company’s second-quarter U.S. Omnipod revenues grew 16.8% year over year, meeting the low end of the guidance, driven by total Omnipod growth of 19.9% year over year. The clinical data demonstrating the efficacy of the Omnipod product platform looks compelling as well. Insulet’s plan to launch the Omnipod 5 buoys optimism for the stock. New customer starts registered record-high growth in the second quarter.

The company is gradually improving with respect to seamless supply chain and manufacturing operations. It has also added significant capacity in preparation for the Omnipod 5 launch in 2021.

For 2021, Insulet expects total Omnipod revenue growth in the range of 18% to 21%. Total company revenue growth is expected in the band of 16% to 20% on strong volume growth of Omnipod DASH, aided by increased investment in awareness, a differentiated pay-as-you-go model in the pharmacy with a mix benefit, expanded access, and Omnipod adoption in the Type 1 and Type 2 diabetes market.

Insulet expects full-year gross margin in the band of 68% to 69%. This expansion will be driven by ongoing benefits of volume shift into the U.S. pharmacy channel, benefits from enhanced manufacturing operations, and lower COVID-related costs.

On the flip side, Insulet exited the second quarter of 2021 with lower-than-expected earnings. Adjusted earnings of 10 cents per share reflected a 54.5% decline from the year-ago earnings. Earnings also missed the Zacks Consensus Estimate by 16.7%. A year-over-year decline in gross profit does not bode well either.

The escalating expenses put pressure on the bottom line. In the second quarter of 2021, selling, general & administrative expenses rose 43.9%. Research and development expenses increased 17.3% year over year.

The projection of a significant fall in Drug Delivery sales in 2021 is concerning. Overall, the continued pandemic-led choppy market conditions raise apprehensions.

Other Key Picks

A few better-ranked stocks from the broader medical space are Alcon Inc ALC, West Pharmaceutical Services, Inc. WST and Henry Schein, Inc. HSIC, each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Alcon has an estimated long-term earnings growth rate of 18%.

West Pharmaceutical Services has an estimated long-term earnings growth rate of 27%.

Henry Schein has a projected long-term earnings growth rate of 14%.

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