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Recovery of Tandem Diabetes Pump (TNDM) shipment, price issue – May 31, 2022

Tandem diabetes (TNDM Free report) benefited from robust international pump shipments. The growing use of the company’s Control-IQ technology gives cause for optimism. However, the company suffers from its heavy reliance on insulin pump sales. The increase in operating expenses does not bode well for the company either. The stock currently carries a Zacks rank #3 (Hold).

Tandem Diabetes ended the first quarter with revenues above expectations. The company reported record growth in sales in the United States and abroad for the first quarter. Robust pump shipments resulting from an increase in the company’s installed base provide cause for optimism. In this regard, the company has reached a new milestone as its installed base has surpassed more than 350,000 people worldwide. This equates to nearly 30% of people using insulin pumps in corporate regions.

In the first quarter of 2022, Tandem Diabetes witnessed strong international demand for the t:slim X2 pump. International shipments at the pump increased 8.4% year over year to 9,437 pumps.

The company also saw strong customer retention in the reported quarter, driven by the impressive positive response to Control-IQ technology. The continued adoption of the company’s t:slim X2 insulin pumps looks encouraging. Rising sales forecasts for 2022 are also inspiring investor confidence.

In February 2022, Tandem Diabetes obtained FDA clearance for the t:connect mobile app, the first-ever smartphone app capable of initiating insulin delivery on iOS and Android operating systems. The company plans to offer this new feature free of charge to nearly 240,000 of its US warranty customers in the coming months.

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Another notable product under development is Mobi, a new miniaturized sustainable pump. Mobi is intended to be fully controlled via a mobile app on a personal smartphone, with the t:connect being the basis of its mobile control functionality. The Mobi pump will be submitted to the FDA via the ace pump 510(k) route in Q3 2022, allowing it to be integrated with interoperable algorithms and CGMs, without requiring additional regulatory review.

On the other hand, Tandem Diabetes Q1 earnings missed the Zacks consensus estimate. The contraction in gross margin is discouraging. During the quarter, selling, general and administrative expenses increased by 25.1%, while research and development expenses increased by 84.6%. Escalating costs resulted in an operating loss in the quarter, which put pressure on bottom line. Additionally, the company is facing pandemic-related staffing issues and headwinds in the global supply chain, which are causing apprehensions.

During the quarter under review, the company’s non-manufacturing costs came under some pressure due to higher freight prices due to global supply issues. Based on increases in transportation and acquisition costs for certain materials, the company expects this pressure to be greater in the coming second quarter.

Additionally, Tandem Diabetes is taking a cautious approach to the potential impact of COVID-19 on its business in 2022. Despite strong demand in international markets, the company expects the impacts of COVID on the timing of Distributor orders continue to produce a significant degree of variability in sales outside of the United States.

Tandem Diabetes has underperformed the industry over the past year. The stock lost 17.2% compared to the industry’s 14.7% drop.

Key Choices

A few higher ranked stocks in the broader medical field are AMN Healthcare Services, Inc. (AMN free report), Medpace Holdings, Inc. (MEDP free report) and Masimo Company (BUT free report).

AMN Healthcare has a long-term earnings growth rate of 1.1%. The company has beat earnings estimates in the past four quarters, delivering an average 15.6% surprise. It currently sports a Zacks rank #1 (Strong Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry over the past year. AMN was down 0.8% compared to the industry’s 64% drop.

Medpace has a historic growth rate of 27.3%. Medpace’s earnings have exceeded estimates for the past four quarters, with the average surprise being 17.1%. He currently has a Zacks Rank #2 (Buy).

Medpace has outperformed its industry over the past year. The MEDP fell 19.6% compared to the industry’s 64% drop.

Masimo has an historic growth rate of 15.1%. Masimo’s earnings have exceeded estimates in each of the past four quarters, with the average surprise being 4.4%. The company currently carries a Zacks Rank #2.

Masimo has underperformed the industry over the past year. MASI fell 34.5% against an industry drop of 17.7%.