IDEXX Laboratories, Inc. IDXX is well poised for growth backed by solid fundamentals within the companion animal market. The company's innovation-based, multi-modality global strategy, enabled by enhanced commercial capability, has been accelerating recurring Companion Animal Group (CAG) Diagnostics revenue growth.
Over the past year, the company’s share price has outperformed its industry. The stock has gained 14.4% in comparison with the industry’s 11.7% rise and the S&P 500’s 7.1% increase.
This leading developer, manufacturer and distributer of products and services, primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets, has a market cap of $18.93 billion.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
What’s Working in Favor of the Stock?
Solid Global Prospects
IDEXX continues to demonstrate solid growth globally with strong international expansion. International revenues in the fourth quarter of 2018 were up 7.7% organically, driven by gains in CAG Diagnostics recurring revenues. This reflected continued consumable revenue gains supported by reference lab growth. Further, international Catalyst placements at newer competitive accounts also increased in the quarter, accounting for 48% of total international Catalyst placements. Also, there was solid double-digit worldwide gain in economic value index.
CAG Continues to Perform Well
IDEXX derives the lion’s share of its revenues from its CAG segment. In the fourth quarter, CAG revenues rose 13% organically year over year, supported by strong CAG Diagnostics recurring revenue growth, high premium CAG instrument placements and continued solid growth in software, services and diagnostic imaging system businesses.
U.S. CAG Diagnostic recurring revenues increased 13.3% organically, driven by mid-teen growth in consumables and reference lab sales and solid growth in rapid assay revenues.
Strong Cash Position
IDEXX exited 2018 with cash and cash equivalents of $123.8 million, compared with $187.7 million at the end of 2017. Net cash provided by operating activities was $400.1 million for 2018, compared with $373.3 million in the year-ago period.
Based on a strong cash position, the company is committed to deliver incremental returns to investors, leveraging on its earnings strength. In the fourth quarter alone, the company bought back 489,000 shares for a total value of $103 million. We are encouraged by the company’s strong track record of share buyback activity.
Which Way Are Estimates Treading?
For the current quarter, the Zacks Consensus Estimate for earnings is pegged at $1.04, reflecting year-over-year growth of 3%. The same for revenues stands at $573.9 million, mirroring 6.7% improvement year over year.
For 2019, the Zacks Consensus Estimate for earnings is pegged at $4.69, reflecting 10.1% year-over-year growth. The same for revenues stands at $2.42 billion, indicating a rise of 9.1%.
Other Key Picks
Other top-ranked stocks in the broader medical space include Penumbra, Inc. PEN, Amedisys, Inc. AMED and Hologic, Inc. HOLX.
Penumbra’s long-term earnings growth rate is expected to be 20.9%. The stock carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Amedisys’ long-term earnings growth rate is projected to be 19.8%. The stock carries a Zacks Rank #2.
Hologic’s long-term earnings growth rate is expected to be 8.9%. The stock carries a Zacks Rank of 2.
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