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IDEXX (IDXX) Tops Q3 Earnings Estimates, Lowers EPS View

Zacks Equity Research

IDEXX Laboratories, Inc. IDXX posted third-quarter 2019 earnings per share (EPS) of $1.24, reflecting 18.1% year-over-year rise on a reported basis and 21% growth at comparable constant exchange rate (CER). The figure surpassed the Zacks Consensus Estimate by 9.7%.

Revenues in Detail

Third-quarter revenues grew 10.9% year over year (up 12% on an organic basis) to $605.3 million. The metric also beat the Zacks Consensus Estimate by 1.4%.

The year-over-year upside was primarily driven by strong global gains from Companion Animal Group (CAG) Diagnostics’ recurring revenues.

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; Livestock, Poultry and Dairy (LPD); and Other. In the third quarter, CAG revenues rose 11.5% (up 12.7% organically) year over year to $533.1 million. The Water segment’s revenues were up 5.4% from the prior-year quarter (up 7.1% organically) to $34.9 million. LPD revenues rose 6.6% (up 9.5% organically) to $31.4 million. Revenues at the Other segment grew 22.2% on a reported basis to $5.9 million.

Margins

Gross profit in the third quarter rose 12.9% to $344.9 million despite 8.6% rise in cost of revenues to $260.4 million. Accordingly, gross margin expanded 95 basis points (bps) to 56.9%.

Sales and marketing expenses rose 9.9% to $104.6 million, while general and administrative expenses moved up 3.7% to $66.3 million. Additionally, research and development expenses rose 17.4% to $34.3 million. Operating margin in the quarter expanded 158 bps to 23.1%.

Financial Position

IDEXX exited the third quarter of 2019 with cash and cash equivalents of $103.9 million compared with $110.8 million at the end of the second quarter of 2019. Year-to-date net cash provided by operating activities was $303.7 million compared with $264.4 million in the year-ago period.

Updated 2019 Outlook

IDEXX slightly narrowed its revenue guidance for 2019. Revenues for the year are now estimated to be $2.39-2.40 billion, (from $2.38-2.41 billion mentioned earlier), indicating organic revenue growth of 10-10.5% (from earlier 9.5-10.5%) and reported revenue growth of 8-8.5% (7.5-9% mentioned earlier). The Zacks Consensus Estimate for revenues of $2.40 billion falls in the upper end of the company’s guided range.

Meanwhile, EPS projection has been lowered to $4.72-4.78 (from $4.82-4.92 mentioned previously), suggesting annualized growth of 15-16% at CER (compared with 17-20% growth stated earlier). The Zacks Consensus Estimate for EPS stands at $4.86, above the company’s projected range.

Our Take

IDEXX exited the third quarter on a strong note with better-than-expected numbers. Solid organic revenue growth is encouraging. The top line in the quarter was driven by strong sales at the CAG business. Specifically, the company witnessed sturdy gains from CAG Diagnostics in the quarter under review.

It also witnessed strong performances in IDEXX VetLab consumables, reference laboratory diagnostic and consulting, and moderately robust growth in rapid assay products’ revenues globally. The strong performance of the company can be attributed to impressive growth in the LPD arm. The global adoption of its latest products and services, including the rapid expansion of Catalyst installed base, and increased utilization of its Fecal Dx Antigen Panel and IDEXX SDMA test, is another contributing factor.

However, a lowered EPS view for 2019 poses concern.

Zacks Rank & Stocks to Consider

Currently, IDEXX carries a Zacks Rank #3 (Hold).

Some better-ranked medical device companies, which posted solid results this earnings season, are ResMed Inc RMD, Edwards Lifesciences Corporation EW and Thermo Fisher Scientific Inc TMO.

ResMed, with a Zacks Rank #2 (Buy), reported first-quarter fiscal 2020 adjusted EPS of 93 cents, surpassing the Zacks Consensus Estimate by 6.9%. Its revenues of $681.1 million outpaced the consensus mark by 3.7%.

Edwards Lifesciences’s third-quarter 2019 adjusted EPS of $1.41 surpassed the Zacks Consensus Estimate by 15.8%. Its revenues totaled $1.09 billion, which surpassed the consensus estimate of $1.03 billion. The stock currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, with a Zacks Rank #2, delivered third-quarter 2019 adjusted EPS of $2.94, beating the Zacks Consensus Estimate by 2.1%. Its revenues of $6.27 billion beat the Zacks Consensus Estimate by 1.3%.

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