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What's in Store for IDEXX Laboratories (IDXX) in Q4 Earnings?

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·5 min read
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IDEXX Laboratories, Inc. IDXX is slated to report fourth-quarter and full-year 2020 results on Feb 2, before market open. In the last-reported quarter, the company’s earnings per share of $1.69 surpassed the Zacks Consensus Estimate by 19%. Moreover, earnings surpassed the consensus estimate in the trailing four quarters, the average beat being 20.38%.

Let's take a look at how things have shaped up prior to this announcement.

Factors at Play

Companion Animal Group

IDEXX is expected to have sustained its strong earnings trajectory in the Companion Animal Group (“CAG”) Diagnostic arm in the fourth quarter on high CAG diagnostic recurring revenues and continued high customer retention. The segment is also likely to have maintained strength in recurring service revenues.

Through the past few quarters, the company has been witnessing solid organic revenues in the CAG segment on strong contributions from its VetLab consumable and Reference Lab. Strength in VetLab consumable revenues are expected to have continued during the to-be-reported quarter, primarily due to solid increases in testing utilization across regions, improved customer retention levels and continued expansion of the company’s global premium install base over the past few months. The robust performance of the Rapid Assay products during the third quarter on the back of pent-up demand for wellness testing is likely to have continued during the fourth quarter as well, thus driving the top line. However, the company’s fourth-quarter revenues are likely to have been impacted by the constraints on the new IDEXX VetLab and diagnostic imaging instrument placements observed for the past few months.

The company, over the past few months, have continued with the installation of its Sedivue Dx, a trend which is likely to have continued through the fourth quarter. IDEXX has already achieved 978 premium hematology placements and 495 SediVue placements, raising the global SediVue install base to more than 10,000 instruments. These developments are likely to have driven the fourth-quarter top line.

IDEXX Laboratories, Inc. Price and EPS Surprise

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

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

Internationally, the CAG arm’s performance in Canada and Australia were strong during the last-reported quarter, primarily resulting from fulfillment of pent-up wellness demand. Further, revenue growth in Europe and other key Asian markets was also robust on the back of broad global recovery in the CAG business. These trends are likely to have continued during the fourth quarter as well, thus pushing up the top line.

The Zacks Consensus Estimate for CAG revenues is pegged at $595 million, suggesting an improvement of 12.3% from the year-ago quarter’s reported figure.

Water

Despite the pandemic-led business challenges, IDEXX’s Water business is likely to have maintained strength as drinking water testing remains an essential service and priority for local governments and utilities. This is expected to get reflected in fourth-quarter results. However, the segment is likely to have been continued to be impacted by pressures on noncompliance-related testing due to the pandemic. Following a dismal third quarter, the company expects the pandemic-led persistence of uneven demand related to noncompliance testing during the yet-to-be-reported quarter.

The company’s SARS-CoV-2 (COVID-19) RealPCR (Real polymerase chain reaction) Test for pets, launched in April, is likely to have maintained momentum during the fourth quarter as well. IDEXX is likely to have continued to benefit from its OPTI SARS-CoV-2 reverse transcription PCR (RT-PCR) test during the fourth quarter. These are likely to have boosted fourth-quarter revenues.

The Zacks Consensus Estimate for Water revenues is pegged at $34.5 million, suggesting an upsurge of 4.9% from the year-ago quarter’s reported figure.

Livestock, Poultry and Dairy

IDEXX’s Livestock, Poultry and Dairy (“LPD”) segment is likely to have continued to benefit from demand for diagnostic testing programs for African swine fever and an improvement in core swine testing volumes in China supported by large producer efforts to rebuild swine herds. Further, the company has registered continued solid growth for poultry testing globally. These are expected to have continued during the fourth quarter as well, thus driving the top line.

The Zacks Consensus Estimate for LPD revenues is pegged at $37.6 million, suggesting an upsurge of 1.6% from the last-reported quarter’s figure.

Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter 2020 revenues is pegged at $679.3 million, indicating a 12.2% rise from the prior-year quarter’s reported figure.

The same for earnings is pegged at $1.43, suggesting a 37.5% improvement from the figure reported in the year-ago quarter.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here as you can see:

Earnings ESP: IDEXX has an Earnings ESP of -0.87%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2.

Stocks Worth a Look

Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

DENTSPLY SIRONA Inc. XRAY has an Earnings ESP of +4.45% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Patterson Companies, Inc. PDCO has an Earnings ESP of +1.96% and a Zacks Rank of 2, at present.

Omnicell, Inc. OMCL has an Earnings ESP of +8.86% and is a Zacks #1 Ranked stock.

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