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IDEXX (IDXX) Earnings Beat Estimates in Q4, Margins Rise

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Zacks Equity Research
·6 min read
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IDEXX Laboratories, Inc. IDXX posted fourth-quarter 2020 earnings per share (“EPS”) of $2.01, reflecting a 93.3% year-over-year rise. The figure surpassed the Zacks Consensus Estimate by 40.6%.

Comparable-constant-currency EPS growth was 43.4%, which excludes an impact of 25 cents per share from the enactment of tax reform in Switzerland and tax benefits from share-based compensation of 13 cents per share.

Full-year adjusted EPS was $6.71, reflecting a 37.2% increase from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 9.5%.

Revenues in Detail

Fourth-quarter revenues grew 19.1% year over year to $720.9 million. Organically, growth was 17.2%. The metric exceeded the Zacks Consensus Estimate by 5.8%.

The year-over-year upside was primarily driven by 23% reported and 21% organic growth in global Companion Animal Group (“CAG”) Diagnostics’ recurring revenue. Sustained strong growth in the Livestock, Poultry and Dairy ("LPD") business also drove the top line. OPTI Medical Systems’ COVID-19 human Polymerase Chain Reaction (“PCR”) testing contributed about 1.5% to the fourth-quarter top line.

However, fourth-quarter results were impacted by a fall in new CAG instrument placement levels and Water business revenues, including pressure on non-compliance water testing, impacted by factors related to the COVID-19 pandemic.

Full-year revenues were $2.71 billion, reflecting a 12.5% increase from the year-ago period. Organically, growth was 12%. Revenues surpassed the Zacks Consensus Estimate by 1.5%.

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise
IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise

IDEXX Laboratories, Inc. price-consensus-eps-surprise-chart | IDEXX Laboratories, Inc. Quote

Segmental Analysis

IDEXX derives revenues from four operating segments — CAG, Water, LPD and Other.

In the fourth quarter, CAG revenues rose 18.9% (up 17% organically) year over year to $629.7 million. The Water segment’s revenues were up 0.7% (up 0.4% organically) year over year to $33.1 million. LPD revenues rose 15.9% (up 12.7% organically) to $42.5 million. Revenues at the Other segment grew 156.2% on reported and organic basis to $15.7 million.

Margins

Gross profit in the fourth quarter rose 23.7% to $409.5 million. Gross margin expanded 211 basis points (bps) to 56.8% despite a 13.5% rise in cost of revenues to $311.4 million.

Sales and marketing expenses rose 9.7% to $115.9 million, while general and administrative expenses moved down 6.6% to $69.7 million. Research and development expenses climbed 10.3% to $38.8 million.

Operating profit in the reported quarter was $185.1 million, reflecting an improvement of 60.1% year over year. Operating margin in the quarter expanded 658 bps to 25.7%.

Financial Position

IDEXX exited 2020 with cash and cash equivalents of $383.9 million compared with $90.3 million recorded at the end of 2019. Total debt (including current portion) for the company at the end of 2020 was $908.5 million compared with total debt of $698.9 million at the end of 2019.

Cumulative net cash provided by operating activities at the end of the year was $648.1 million compared with $459.2 million a year ago.

2021 Outlook

IDEXX, boosted by the ongoing business recovery and strong performances in the reported quarter, has provided the initial financial outlook for 2021.

The company projects the revenues for the year to be in the range of $3.07-$3.12 billion, reflecting growth of 13-15.5% on a reported basis. Organic growth is expected in the range of 11.5-13.5%. The Zacks Consensus Estimate for the same is currently pegged at $2.98 billion.

The CAG Diagnostics recurring revenues for 2021 are expected to reflect a growth of 13.5-16% on a reported basis and 12-14.5% on an organic basis.

Further, IDEXX projects full-year EPS to be in the range of $7.39-$7.71, reflecting growth of 10-14% on a reported basis. The Zacks Consensus Estimate for the same is currently pegged at $6.91.

Further, the comparable constant currency growth is expected in the range of 15-20%.

Our Take

IDEXX exited the fourth quarter with better-than-expected results. Solid organic-revenue growth is encouraging. The top line in the quarter was driven by strong sales at the CAG and LPD businesses. The company witnessed sturdy gains in CAG Diagnostics recurring revenues, supported by sustained strong global trends in pet healthcare in the quarter under review.

The company’s performance in major geographies is also encouraging. Further, the company’s human health business, OPTI Medical Systems’ COVID-19 human PCR testing also contributed to the top line. Margin expansions look encouraging.

However, the pandemic has limited the new CAG instrument placement levels, which is worrying. Further, continued pandemic-led pressures on non-compliance testing volumes is concerning.

Zacks Rank & Other Key Picks

IDEXX has a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader medical space are Abbott Laboratories ABT, Hologic, Inc. HOLX and AngioDynamics, Inc. ANGO.

Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, beating the Zacks Consensus Estimate by 33.6%. The company currently flaunts a Zacks Rank #1.

AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny against the Zacks Consensus Estimate of a loss per share of 2 cents. Revenues of $72.8 million beat the consensus mark by 8%. The company currently carries a Zacks Rank #2.

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