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

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IDEXX Laboratories, Inc. (IDXX - Free Report) is slated to report fourth-quarter 2016 results on Feb 2, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 5.08%. Further, IDEXX’s earnings outpaced the Zacks Consensus Estimate in the past four quarters, the average beat being 13.52%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

In the third quarter of 2016, despite strong growth in China and Brazil, IDEXX’s Livestock, Poultry and Dairy (LPD) segment saw a slight decline in organic revenues on account of low levels of testing related to European bovine disease eradication programs and reduced health herd screening in Asia. This unfavorable scenario is expected to linger in the quarters ahead, impacting the fourth quarter’s LPD performance.

Idexx Laboratories Inc. Price and EPS Surprise

 

Idexx Laboratories Inc. Price and EPS Surprise | Idexx Laboratories Inc. Quote

Moreover, foreign currency fluctuations are expected to hurt IDEXX’s growth in the future. In the guidance issued earlier, management had assumed that the effect of the stronger U.S. dollar will impact 2016 revenues by less than 1%. Further, the company estimated that these foreign exchange rate changes will dent 2016 earnings by 20 cents.

We note that the company’s high reliance on third-party distributors is a major dampener. Also, the purchasing dynamics of distributors have a significant impact on the company’s sales of instrument consumables and rapid assay products. Also, stiff competition is a major concern. Also, the competitive landscape in the domestic and overseas markets weighs on IDEXX’s performance. This struggle to gain market share might also prove to be a drag on results.

On the brighter side, investors are positive about the company recent addition to the coveted S&P 500 benchmark. IDEXX is also currently leading the Companion Animal Group (CAG) market. The company boasts advanced innovation including the recently launched Catalyst One, SDMA and SediVue. Management efforts to strengthen in the CAG market are expected to boost results going ahead.

This apart, IDEXX continues to display solid growth with respect to international expansion. The company has been raking in considerable revenues in the companion animal market of emerging nations such as China and Brazil, demonstrating the substantial long-term potential. Further, management’s consistent share buybacks reflect its strong free cash flow reserve. We believe, the outcome of these endeavors will be reflected in the yet-to-be-reported quarter’s performance.

Estimate Revision Trend

For the fourth quarter of 2016, one estimate moved south with no movement in the opposite direction in the past one month. However, the magnitude of the estimate revision trend is indicating a stable picture with earnings estimates remaining stable at 51 cents over the last same time frame. The company’s fundamental concerns justifies the inconclusive estimate revision trend.

Earnings Whispers

Our quantitative model doesn’t point to an earnings beat. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  IDEXX has an Earnings ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.79. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: IDEXX has a Zacks Rank #4 (Sell). Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:

Cempra Inc. has an Earnings ESP of +15.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Molina Healthcare Inc. (MOH - Free Report) has an Earnings ESP of +5.33% and a Zacks Rank #2.

Universal Health Services, Inc. (UHS - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #2.

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