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IDEXX Laboratories' CAG Revenues Solid, Competition Rife

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On Apr 5, we issued an updated research report on Delaware NJ-based IDEXX Laboratories, Inc. (IDXX - Free Report) – a manufacturer and distributer of products and services mainly for the companion animal veterinary, livestock and poultry, water testing and dairy markets.

Over the last three months, IDEXX significantly outperformed the Zacks Categorized Medical - Instruments industry with respect to price movement, primarily backed by its latest addition to the coveted S&P 500 benchmark. The stock has till now gained 30.7%, in comparison to the broader industry’s 4.9%.



The raised EPS guidance for 2017 indicates a bullish trend in the days ahead. Further, the company’s consistent share buybacks reflect its strong free cash flow reserve.

Meanwhile, IDEXX continues to demonstrate solid growth globally buoyed by strong international expansion. The company is currently observing strong growth on the back of companion animal group (CAG) revenues in emerging markets such as China and Brazil.

Management also believes that the unprecedented wave of innovation will immensely benefit the company’s CAG platform, in the near as well as long term. These innovations include the recently launched Catalyst One, SDMA and SediVue.

While IDEXX’s share price outperformed the broader market over the last three months, its valuation looks stretched in terms of price-to-earnings ratio (P/E - F12M) when compared with its own industry. The stock currently trades at a P/E ratio of 50.5 compared with 27.7 for the broader industry. In fact, the industry’s current P/E has been close to the stock’s upper level in the last three months.

The company’s high dependence on third-party distributors continues to pose threat. Moreover, foreign currency fluctuations are expected to consistently hurt IDEXX’s growth.

IDEXX competes with several companies in the animal health space. Its companion animal veterinary diagnostic products and services compete with both reference laboratory service and in-clinic product providers. Its major competitors in the CAG business in North America are Antech Diagnostics, Abaxis, Inc. and Heska Corporation. Moreover, competitive landscape in the overseas market weighs on IDEXX. This fight over market share might dent results going ahead.

Zacks Rank & Key Picks

IDEXX currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the broader Medical space include Inogen, Inc. (INGN - Free Report) , Orasure Technologies, Inc. (OSUR - Free Report) and ZELTIQ Aesthetics, Inc. . While Inogen sports a Zacks Rank #1 (Strong Buy), Orasure and ZELTIQ Aesthetics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen gained 62.2% in the last one year compared with the S&P 500’s gain of 15.2%. The company reported a stellar four-quarter positive average earnings surprise of over 49.08%.

Orasure surged 73.4% in the last one year compared with the S&P 500’s gain. Its four-quarter average earnings surprise was a positive 123.5%.

ZELTIQ Aesthetics gained over 88.7% in the past one year, better than the S&P 500 mark. It posted a trailing four-quarter positive average earnings surprise of 12.03%.

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