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Can IDEXX (IDXX) Post a Beat in Q4 Earnings on CAG Strength?
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IDEXX Laboratories, Inc. (IDXX - Free Report) is expected to beat earnings when it reports fourth-quarter 2017 results on Feb 1, before the opening bell.
Last quarter, the company delivered a positive earnings surprise of 5.3%. It is worth noting that IDEXX has outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 9.4%. Let’s take a look at how things are shaping up prior to this announcement.
Key Catalyst
Similar to the prior quarter, IDEXX is expected to gain from strong global growth in Companion Animal Group (CAG) Diagnostics recurring revenues. The upside was driven by double-digit organic revenue gains across consumable and reference lab, strong acceptance of rapid assays and veterinary software, services and diagnostic imaging systems as well as continued expansion of IDEXX's premium instrument installed base. Management expects the solid performance to reflect in the fourth-quarter results as well.
We are also upbeat about IDEXX enhancing commercial capabilities in the United States to maintain recurring revenue growth at CAG Diagnostics. Management expects fourth-quarter results to show a rise in productivity as new sales representatives establish new customer relationships and switch to commission-based compensation for instrument placements. Also, we expect the company to report exceptional customer retention rates for reference labs and instrument consumables in the United States and worldwide in the fourth quarter.
The Zacks Consensus Estimate for CAG Diagnostics revenues of $425 million reflects an increase of 11.9% from the year-ago quarter.
Overall, the Zacks Consensus Estimates for fourth-quarter total revenues are projected at $491 million, up 10.9% from the prior-year quarter. Notably, IDEXX expects 2017 revenues in the range of $1,950-$1,960 million, reflecting organic revenue growth of 9.5% to 10%.
Here are the other factors that might influence IDEXX’s fourth-quarter results:
We are upbeat about growth in the Water Business, which has been on a growth trajectory of late on encouraging test results in the United States and benefits from global go-direct initiatives. Moreover, in the last reported quarter, the business witnessed 10% organic growth. Management is also looking forward to benefits from two favorable regulatory developments pertaining to wastewater in the United States and drinking water in Europe. Accordingly, the Zacks Consensus Estimate for Water revenues of $27.3 million reflects an increase of 12.3% from the year-ago quarter.
IDEXX continues to expand globally. It has been significantly benefitting from the bountiful opportunities in the companion animal diagnostics market of emerging nations. 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 fourth-quarter performance.
Management also estimates 2017 EPS in the band of $3.22-$3.26, supported by continued operating margin expansion aligned with its long-term goals. The outlook represents year over year EPS growth of 32-34% on a reported basis. The Zacks Consensus Estimate for earnings of 73 cents shows an increase of 25.9% from a year ago.
On the flip side, foreign currency fluctuation is a major headwind. Another concern is the company’s high reliance on third-party distributors. The purchasing dynamics of distributors have a significant impact on the company’s sales of instrument consumables and rapid assay products. Also, IDEXX has been seeing a rise in operating expenses owing to increased head count along with higher investments in portfolio development and expansion in the United States and internationally.
Also, the competitive landscape in the domestic and overseas markets weighs on IDEXX’s performance. The struggle to gain market traction might prove to be a drag on fourth-quarter results.
Here is what our quantitative model predicts:
IDEXX has the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — needed for increasing the odds of an earnings beat.
Zacks ESP: The Earnings ESP for IDEXX is +0.82%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: IDEXX carries a Zacks Rank #2 (Buy).
Other Stocks Worth a Look
Here are a few other medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Myriad Genetics (MYGN - Free Report) has an Earnings ESP of +0.42% and a Zacks Rank #3.
Henry Schein (HSIC - Free Report) has an Earnings ESP of +0.09% and a Zacks Rank #3.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius. Click for details >>
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Can IDEXX (IDXX) Post a Beat in Q4 Earnings on CAG Strength?
IDEXX Laboratories, Inc. (IDXX - Free Report) is expected to beat earnings when it reports fourth-quarter 2017 results on Feb 1, before the opening bell.
Last quarter, the company delivered a positive earnings surprise of 5.3%. It is worth noting that IDEXX has outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 9.4%. Let’s take a look at how things are shaping up prior to this announcement.
Key Catalyst
Similar to the prior quarter, IDEXX is expected to gain from strong global growth in Companion Animal Group (CAG) Diagnostics recurring revenues. The upside was driven by double-digit organic revenue gains across consumable and reference lab, strong acceptance of rapid assays and veterinary software, services and diagnostic imaging systems as well as continued expansion of IDEXX's premium instrument installed base. Management expects the solid performance to reflect in the fourth-quarter results as well.
We are also upbeat about IDEXX enhancing commercial capabilities in the United States to maintain recurring revenue growth at CAG Diagnostics. Management expects fourth-quarter results to show a rise in productivity as new sales representatives establish new customer relationships and switch to commission-based compensation for instrument placements. Also, we expect the company to report exceptional customer retention rates for reference labs and instrument consumables in the United States and worldwide in the fourth quarter.
The Zacks Consensus Estimate for CAG Diagnostics revenues of $425 million reflects an increase of 11.9% from the year-ago quarter.
Overall, the Zacks Consensus Estimates for fourth-quarter total revenues are projected at $491 million, up 10.9% from the prior-year quarter. Notably, IDEXX expects 2017 revenues in the range of $1,950-$1,960 million, reflecting organic revenue growth of 9.5% to 10%.
IDEXX Laboratories, Inc. Price and EPS Surprise
IDEXX Laboratories, Inc. Price and EPS Surprise | IDEXX Laboratories, Inc. Quote
Here are the other factors that might influence IDEXX’s fourth-quarter results:
We are upbeat about growth in the Water Business, which has been on a growth trajectory of late on encouraging test results in the United States and benefits from global go-direct initiatives. Moreover, in the last reported quarter, the business witnessed 10% organic growth. Management is also looking forward to benefits from two favorable regulatory developments pertaining to wastewater in the United States and drinking water in Europe. Accordingly, the Zacks Consensus Estimate for Water revenues of $27.3 million reflects an increase of 12.3% from the year-ago quarter.
IDEXX continues to expand globally. It has been significantly benefitting from the bountiful opportunities in the companion animal diagnostics market of emerging nations. 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 fourth-quarter performance.
Management also estimates 2017 EPS in the band of $3.22-$3.26, supported by continued operating margin expansion aligned with its long-term goals. The outlook represents year over year EPS growth of 32-34% on a reported basis. The Zacks Consensus Estimate for earnings of 73 cents shows an increase of 25.9% from a year ago.
On the flip side, foreign currency fluctuation is a major headwind. Another concern is the company’s high reliance on third-party distributors. The purchasing dynamics of distributors have a significant impact on the company’s sales of instrument consumables and rapid assay products. Also, IDEXX has been seeing a rise in operating expenses owing to increased head count along with higher investments in portfolio development and expansion in the United States and internationally.
Also, the competitive landscape in the domestic and overseas markets weighs on IDEXX’s performance. The struggle to gain market traction might prove to be a drag on fourth-quarter results.
Here is what our quantitative model predicts:
IDEXX has the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — needed for increasing the odds of an earnings beat.
Zacks ESP: The Earnings ESP for IDEXX is +0.82%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: IDEXX carries a Zacks Rank #2 (Buy).
Other Stocks Worth a Look
Here are a few other medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Bio-Rad Laboratories (BIO - Free Report) has an Earnings ESP of +4.45% and a Zacks Rank #1 (Stron Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Myriad Genetics (MYGN - Free Report) has an Earnings ESP of +0.42% and a Zacks Rank #3.
Henry Schein (HSIC - Free Report) has an Earnings ESP of +0.09% and a Zacks Rank #3.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>