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Challenges and Opportunities for Tandem Diabetes (TNDM)

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The performance of Tandem Diabetes Care, Inc. (TNDM) in the fourth quarter of 2023 revealed a 27-cent per share adjusted loss, significantly expanding from the 1-cent loss during the same period a year ago. To add insult to injury, the company fell short of market expectations, missing the Zacks Consensus Estimate of a 23-cent loss. On a GAAP basis, the loss stood at 46 cents per share, climbing from 25 cents in the equivalent quarter of the previous year.

Revenues Fall Short

Tandem Diabetes reported GAAP revenues of $196.8 million for the quarter, marking a 10.8% downward slide compared to last year and also missing the Zacks Consensus Estimate by 3.9%. The company’s decision to introduce the Tandem Choice Program last September for eligible t:slim X2 customers, aimed at providing them with the opportunity to own the newest hardware platform, Tandem Mobi, will now prompt the company to report adjusted revenues as well. The additional non-GAAP revenues amounted to $209.3 million in the reported quarter, driven by 27,000 pump shipments worldwide.

Quarter in Brief

Dividing its reports into two geographic segments, Tandem Diabetes posted a total of $150.9 million in sales in the United States for the fourth quarter—experiencing a 7.7% decline from the previous year’s figures. Non-GAAP sales inside the United States were tabulated at $163.5 million. Tandem Diabetes shipped 21,000 pumps in the US during the quarter, which is a dip from the 24,000 shipments in the same period the year earlier.

Outside the United States, the company’s sales amounted to $45.9 million, both on a GAAP and non-GAAP basis, showcasing a 16.1% downturn from the corresponding period.

Margin Details and Financial Outlook

The gross profit for the fourth quarter rested at $93.3 million, experiencing a 19.2% decline year over year. Despite a 1.4% reduction in the cost of sales to $103.5 million, the gross margin shrank by 498 basis points to 47.4%. The quarter also witnessed SG&A expenses drop by 12.2% to $85.8 million, whereas R&D expenses soared by 19.7% to $42.6 million. The company rounded off the quarter with an adjusted operating loss of $35.1 million, significantly higher than the year-ago operating loss of $17.8 million.

Exiting the fourth quarter of 2023, Tandem Diabetes had cash, cash equivalents, and short-term investments amounting to $467.9 million, marking a descent from $616.9 million at the end of the fourth quarter of 2022. The company revealed its financial outlook for 2024, estimating non-GAAP sales to be around $850 million for the full year.

Analysis and Future Prospects

Perplexingly, Tandem Diabetes faced significant challenges in the fourth quarter of 2023, closing with a wider-than-anticipated loss and missing revenue estimates. Sales outside the United States were notably affected by various unique one-time occurrences, such as the transition to the European distribution center and the recent alteration in the French reimbursement structure, which in turn elevated the quarterly operating loss, highly disheartening for investors.

Despite these setbacks, the company still managed to implement a series of strategic initiatives. Notably, it launched its novel diabetes management platform, Tandem Source, intended for customers and healthcare providers in the United States. Additionally, it debuted the highly anticipated t:slim X2 insulin pump software integrated with Dexcom G7 Continuous Glucose Monitoring technology. Tandem Diabetes is continuing to progress its future product portfolio, primarily focusing on its pump platforms—t:slim, Mobi, and Sigi—which is undeniably optimistic.

Investor Guidance

Tandem Diabetes currently holds a Zacks Rank #4 (Sell). It’s worth considering some better-ranked stocks from the broader medical space such as Stryker Corporation (SYK), Cencora, Inc. (COR), and Cardinal Health (CAH).

Stryker, currently carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, surpassing the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion also outpaced the consensus estimate by 3.8%. Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company has recorded consistent earnings beats over the last four quarters, averaging 5.1%.

Meanwhile, Cencora, holding a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, exceeding the Zacks Consensus Estimate by 14.7%. Revenues stood at $72.3 billion, surpassing the Zacks Consensus Estimate by 5.1%. The company’s robust earnings yield of 5.75% compared with the industry’s 1.85% is a remarkable indicator. Likewise, Cardinal Health reported a second-quarter fiscal 2024 adjusted earnings of $1.82, beating the Zacks Consensus Estimate by 16.7%. Revenues escalated by 11.6% on a year-over-year basis to $57.45 billion and also exceeded the Zacks Consensus Estimate by 1.1%. The company holds a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth and has consistently surpassed earnings estimates over the past four quarters, with an average surprise of 15.6%.

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Stryker Corporation (SYK) : Free Stock Analysis Report

Cardinal Health, Inc. (CAH) : Free Stock Analysis Report

Cencora, Inc. (COR) : Free Stock Analysis Report

Tandem Diabetes Care, Inc. (TNDM) : Free Stock Analysis Report

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