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IDEXX (IDXX) Suffers From Macro Headwinds, Cost Constraints

IDEXX Laboratories IDXX suffers from currency fluctuations along with high dependence on third-party distributors. The stock carries a Zacks Rank #4 (Sell).

Over the past year, IDEXX has been underperforming its industry with respect to share price movement. The stock has lost 43.5% compared with the 22.2% decline of the industry. In the second quarter, IDEXX’s LPD revenues witnessed unfavorable comparisons due to high prior-year revenues and additional impacts in China related to reduced African swine fever testing in this region.

This apart, within CAG, lab revenues were flat organically in the international regions, reflecting pressure on same-store clinic visit growth in Europe, including increased macroeconomic impacts.

Further, escalating operating costs resulting in a contraction in the operating margin are concerns. According to the company, $80 million of discrete R&D investment in the quarter and operating expense growth related to investments in commercial capabilities put pressure on the bottom line. A lowered 2022 guidance adds to the concern.

Further, the majority of IDEXX’s consolidated revenues are derived from the sale of products in international markets. Thus, the strengthening of the rate of exchange for the U.S. dollar relative to other currencies had a negative impact on the company’s revenues derived in currencies other than the U.S. dollar and on profits from products manufactured in the United States and sold internationally.

IDEXX Laboratories, Inc. Price

IDEXX Laboratories, Inc. Price
IDEXX Laboratories, Inc. Price

IDEXX Laboratories, Inc. price | IDEXX Laboratories, Inc. Quote

On a positive note, IDEXX exited the second quarter of 2022 with better-than-expected earnings. The company registered year-over-year growth in revenues on both reported and organic basis. The top line was driven by strong sales at the CAG and Water businesses. Growth was supported by record instrument placements, resulting in year-over-year expansion of IDEXX's global premium instrument installed base, which is encouraging.

CAG premium instrument placements increased 18% in the second quarter, reflecting 25% growth internationally, as clinics showed continued confidence in investing toward support of increasing demand for diagnostics globally. The quality of instrument placements continued to be excellent, reflecting 9% growth in new and competitive Catalyst placements. ProCyte One momentum continues to build, supported by the company’s global expansion efforts leading to a 64% year-on-year increase in premium hematology placements in the quarter.

Key Picks

A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, Molina Healthcare, Inc. MOH and Patterson Companies, Inc. PDCO.

AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare has outperformed its industry in the past year. AMN has lost 0.4% against the industry’s 27.6% fall.

Molina Healthcare has a long-term earnings growth rate of 16.4%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 3.2%, on average. It currently carries a Zacks Rank #2 (Buy).

Molina Healthcare has outperformed its industry in the past year. MOH has gained 30.7% against the industry’s 30.6% growth.

Patterson Companies has an estimated long-term growth rate of 7.9%. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%. It currently has a Zacks Rank #2.

Patterson Companies has outperformed its industry in the past year. PDCO has gained 1.6% compared with the industry’s 4.1% fall in the past year.


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