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Inogen (INGN) Q3 Earnings Beat, 2018 Revenue Guidance Up

Inogen, Inc. INGN posted third-quarter 2018 earnings per share of 73 cents, which surpassed the Zacks Consensus Estimate by 40.4%. The bottom line also improved a whopping 121.1% from the figure registered in the year-ago quarter.

Revenues totaled $95.3 million, which trumped the Zacks Consensus Estimate of $91 million. On a year-over-year basis, the top line climbed 38%.

In a year’s time, this Zacks Rank #3 (Hold) stock has gained 24.3% compared with the industry’s 20.9% growth and  the S&P 500 index’s 8.5% rise.

Segmental Details

Sales revenues totaled $89.7 million, up 42.1% on a year-over-year basis.

Business-to-business revenues in the United States amounted to $30.3 million, up 32% on a year-over-year basis. The uptick was primarily driven by increased sales representative headcount and additional consumer advertising.

Internationally, this segment recorded revenues of $21.1 million, up 23% year over year, courtesy of continued adoption from the company’s European partners.

Inogen, Inc Price, Consensus and EPS Surprise

 

Inogen, Inc Price, Consensus and EPS Surprise | Inogen, Inc Quote

Direct-to-consumer revenues in the United States grossed $38.3 million in the third quarter. This reflects an increase of 66.3% from the prior-year quarter. The upside can be attributed to continued adoption by traditional home medical equipment providers and internet resellers.

Rental revenues totaled $5.6 million, down 5.3% on a year-over-year basis. Per management, the downturn was primarily due to a decline in net rental patients.

Margins

In the quarter under review, gross profit was $48.8 million, up 47.2% year over year. Gross margin came in at 51.2%, which expanded 310 basis points (bps).

Adjusted operating profit was $10.4 million, up 24.8% year over year. Adjusted operating margin came in at 10.9%, down 120 bps from the prior-year quarter.

Adjusted EBITDA was $16.3 million, up 16.2% on a year-over-year basis.

2018 Guidance

Inogen raised its 2018 revenue guidance. The company expects revenues to be within $345-$355 million, up from the previously guided $340-$350 million. Notably, this reflects a year-over-year growth of 38.3-42.3%. The Zacks Consensus Estimate is pegged at $347.9 million, within the guided range.

However, Inogen expects its rental revenues to decline by 10% on a year-over-year basis in 2018.

The company envisions adjusted net income between $46 million and $48 million compared with $45 million and $48 million projected earlier. This represents a year-over-year growth of 119-128.5%.

Furthermore, 2018 EBITDA is expected to be within $60-$62 million, down from the earlier issued guidance of $65-$69 million, representing a year-over-year growth of 18-22%.

2019 View

Inogen provided an outlook for 2019 as well. Revenues are expected between $430 million and $440 million, representing 22.9-25.7% growth over 2018. The Zacks Consensus Estimate stands at $432.7 million, within the guided range.

Full-year adjusted EBITDA is projected between $67 million and $71 million, representing 9.8-16.4% growth over 2018.

Our Take

Inogen wrapped up the third quarter on a solid note delivering better-than-expected performance. Solid business-to-business revenues also buoy optimism. These apart, the company’s direct-to-consumer unit performed exceedingly well in the quarter. In fact, management expects the unit to be the fastest growing one in 2019. Moreover, the company remains optimistic about its international revenues, which saw solid growth in Europe in the third quarter. The raised revenue guidance for 2018 is an added positive. Inogen issued a bullish guidance for 2019 as well. A considerable expansion in gross margin is also encouraging.

On the flip side, Inogen’s rental revenues declined on a year-over-year basis in the third quarter. In fact, the company expects rental revenues to be down in 2018 and grow modestly in 2019. Moreover, contraction in operating margin is worrisome. Rising operating expenses are discouraging as well.

Earnings of MedTech Majors at a Glance

Some better-ranked stocks from the broader Medical space that delivered robust results this earnings season are Intuitive Surgical ISRG, Stryker Corporation SYK and Merit Medical Systems, Inc. MMSI. Notably, each of the stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted earnings per share of $2.83, which exceeded the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, which outpaced the consensus mark of $918.6 million.

Stryker posted third-quarter 2018 adjusted earnings per share of $1.69, which outpaced the Zacks Consensus Estimate by a penny. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted earnings per share of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus mark of $218 million.

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