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IDEXX (IDXX) Q4 Earnings Beat Estimates, Gross Margin Up

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IDEXX Laboratories, Inc. IDXX posted fourth-quarter 2021 earnings per share (EPS) of $1.89, reflecting a 5.9% year-over-year decline. However, the figure surpassed the Zacks Consensus Estimate by 13.2%.

Comparable constant-currency EPS of $1.83 in the fourth quarter of 2021 reflects year-over-year growth of 12.3%.

Full-year EPS was $8.60, up 28.2% from the year-ago number. The metric surpassed the Zacks Consensus Estimate by 2.6%.

Revenues in Detail

Fourth-quarter revenues grew 11.1% year over year to $801.1 million. Organically, growth was 10.5%. The metric surpassed the Zacks Consensus Estimate by 2.7%.

The year-over-year upside was primarily driven by 18% reported and 17% organic growth in global Companion Animal Group (CAG) Diagnostics’ recurring revenues and 18% reported and 21% organic growth in CAG Diagnostics capital instrument revenues. Overall revenue growth was also supported by 12% reported and 13% organic revenue growth in the Water business.

Full-year revenues were $3.22 billion, reflecting an 18.8% increase from the year-ago period (up 16% on an organic basis). Revenues also surpassed the Zacks Consensus Estimate by 0.9%.

Segmental Analysis

IDEXX derives revenues from four operating segments — CAG, Water, Livestock, Poultry and Dairy (LPD), and Other.

In the fourth quarter, CAG revenues rose 14.2% (up 13.4% organically) year over year to $719.1 million. The Water segment’s revenues also grew 12.2% (up 12.7% organically) year over year to $37.1 million. However, LPD revenues dropped 20% (down 18.9% organically) to $33.9 million. Revenues at the Other segment fell 30.7% on a reported basis to $10.9 million.

Margins

Gross profit in the fourth quarter rose 11.5% to $456.4 million. Gross margin expanded 17 basis points (bps) to 56.9% despite a 10.7% rise in the cost of revenues to $344.7 million.

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

Sales and marketing expenses rose 10.8% to $128.5 million, while general and administrative expenses were down 19.7% to $83.5 million. Research and development expenses climbed 16.8% to $45.3 million.

Overall, operating profit in the reported quarter was $199.2 million, reflecting an improvement of 7.6% year over year. Despite that, operating margin in the quarter contracted 81 bps to 24.9%.

Financial Position

IDEXX exited 2021 with cash and cash equivalents of $144.4 million compared with $145.2 million recorded at the end of 2020. Total debt (including current portion) at the end of 2021 was $850.2 million compared with total debt of $908.5 million at the end of 2020.

Cumulative net cash provided by operating activities at the end of 2021 was $755.5 million compared with $648.1 million a year ago.

2022 Guidance

The company has initiated 2022 outlook.

For 2022, the company expects revenue growth in the range of $3.50-$3.56 billion, indicating growth of 9-11% on a reported basis (Organic growth of 10-12%). The Zacks Consensus Estimate for the same is currently pegged at $3.53 billion.

CAG Diagnostics’ recurring revenues are expected to grow 10.5-12% on a reported basis and 12-14% on an organic basis.

Further, IDEXX full-year EPS guidance is in the range of $9.27-$9.59, indicating growth of 8-11% on a reported basis. The Zacks Consensus Estimate for full-year EPS is currently pegged at $9.33.

Our Take

IDEXX exited the fourth quarter of 2021 with better-than-expected results. Its organic revenue growth was encouraging. The top line was driven by strong sales at the CAG and Water businesses. Strong growth supported by record instrument placements, resulting in year-over-year expansion of IDEXX's global premium instrument installed base, looks encouraging. The company witnessed continued high CAG Diagnostics recurring revenue growth across major regions with solid gains across its major in-clinic platforms.

On the flip side, LPD revenues declined in the quarter, constrained by comparisons to high prior-year levels and additional impacts in China related to changes in local ASF disease management approaches, lower pork prices and changes in government requirements related to livestock infectious disease testing programs. Further, the escalating operating costs resulting in a contraction in operating margin are concerns.

Zacks Rank & Key Picks

IDEXX Laboratories currently carries a Zacks Rank #4 (Sell).

Here are a few medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

AMN Healthcare Services, Inc. AMN has an Earnings ESP of +10.29% and a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 5.5% compares favorably with the industry’s 0.8%.

Henry Schein, Inc. HSIC has an Earnings ESP of +1.94% and a Zacks Rank of 2.

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC's earnings yield of 5.9% compares favorably with the industry’s 4.1%.

Laboratory Corporation of America Holdings LH or LabCorp has an Earnings ESP of +9.21% and a Zacks Rank #1.

LabCorp’s long-term earnings growth rate is estimated at 7.4%. LH’s earnings yield of 5.3% compares favorably with the industry’s 4.8%.


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