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IDEXX Laboratories, Inc. (IDXX - Free Report) scaled a new 52-week high of $660.26 on Jul 6, before closing the session marginally lower at $658.99.
The company’s shares have charted a solid trajectory in recent times, appreciating 95.3% over the past year, ahead of 22% growth of the industry it belongs to and 40% surge of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 24.6%, way ahead of the industry’s 3.7% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate of 19.6% too exceeds the industry’s 16.8% growth projection and the S&P 500’s 10.9% expectation.
Strong sales at the core Companion Animal Group (CAG) and Livestock, Poultry and Dairy (LPD) arms are driving the top line for IDEXX Laboratories. The company is also registering sturdy gains in CAG Diagnostics’ recurring revenues, supported by sustained strong global trends in pet healthcare.
Image Source: Zacks Investment Research
Further, the market is also full of optimism surrounding the latest acquisition of New Zealand-based next-generation cloud-native practice management software ezyVet,which seems to be strategically well aligned at this moment. Further, the raised 2021 guidance boosted by the ongoing business recovery and strong first-quarter 2021 performances buoys optimism.
Let’s delve deeper.
Key Growth Catalysts
Recovery in CAG and LPD Arms: Investors are optimistic about the company witnessing consistent strong rebound in organic CAG revenues since the beginning of 2021 driven by strong organic growth in both the United States and in international markets. Continued strength in clinical visits and related diagnostic products and services, along with some benefits from lapping of prior-year COVID-19 impacts late in the reported quarter aided CAG Diagnostics recurring revenues. LPD too is growing organically,banking on strong sales in the Asia Pacific region. LPD results in the first quarter largely benefited from growing sales of diagnostic testing programs for African swine fever. Further, there has been growth in core swine testing volumes in China in the quarter.
ezyVet Acquisition Seems Strategic: Investors are looking forward to IDEXX’slatest acquisition of ezyVet,which is believed to integrate ezyVet’s industry-leading technology with IDEXX's scale and cloud-based innovation to advance technology solutions to customers raising the standard of care for patients, improving veterinary practices and facilitating effective communication with pet owners. With the completion of the acquisition, IDEXX’s three core practice information management system (PIMS) offerings, including Cornerstone Software, Neo Software and ezyVet (as the newest addition), are well suited to support veterinary practices of varying sizes.
Upbeat 2021 Guidance: The raised full-year 2021 guidance as stated by the company during its first-quarter earnings update instills investor confidence in the stock. The company projects revenues for the year to be in the range of $3,105 million-$3,160 million, reflecting growth of 14.5-16.5% and 13-15% on a reported and on an organic basis, respectively. Further, IDEXX projects full-year earnings per share to be in the range of $7.88-$8.18, indicating growth of 17-22% on a reported basis (up from the previously-issued outlook of $7.39-$7.71, indicatinggrowth of 10-14%).
Downsides
On the flip side, there are some factors deterring the stock’s rally of late.
Q1 Sales Drop in a Few Businesses: In the lastreported quarter, the company registered a decline in diagnostic imaging systems revenues,impacted by a year-over-year reduction in generation instrument platform sales denting the overall Veterinary software, services and diagnostic imaging systems’top-line growth. Further, investors are worried about the continued lower organic revenues from the Water segment.
Leveraged Balance Sheet: A weak capital structure does not bode well either. IDEXX exited the first quarter of 2021 with cash and cash equivalents of $351.2 million. Meanwhile, total debt was $903.7 million for the period. The quarter’s total debt-to-capital ratio of 0.56 indicating a leveraged balance sheet adds to investors’ woe.
Zacks Rank & Key Picks
IDEXX Laboratories currently carries a Zacks Rank #3 (Hold).
Envista Holdings has an estimated long-term earnings growth rate of 26%.
BellRing Brands has an estimated long-term earnings growth rate of 22%.
Baxter International has a projected long-term earnings growth rate of 9%.
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Image: Bigstock
IDEXX Laboratories (IDXX) Hits 52-Week High: What's Driving It?
IDEXX Laboratories, Inc. (IDXX - Free Report) scaled a new 52-week high of $660.26 on Jul 6, before closing the session marginally lower at $658.99.
The company’s shares have charted a solid trajectory in recent times, appreciating 95.3% over the past year, ahead of 22% growth of the industry it belongs to and 40% surge of the S&P 500 composite.
Over the past five years, the company registered earnings growth of 24.6%, way ahead of the industry’s 3.7% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate of 19.6% too exceeds the industry’s 16.8% growth projection and the S&P 500’s 10.9% expectation.
Strong sales at the core Companion Animal Group (CAG) and Livestock, Poultry and Dairy (LPD) arms are driving the top line for IDEXX Laboratories. The company is also registering sturdy gains in CAG Diagnostics’ recurring revenues, supported by sustained strong global trends in pet healthcare.
Further, the market is also full of optimism surrounding the latest acquisition of New Zealand-based next-generation cloud-native practice management software ezyVet,which seems to be strategically well aligned at this moment. Further, the raised 2021 guidance boosted by the ongoing business recovery and strong first-quarter 2021 performances buoys optimism.
Let’s delve deeper.
Key Growth Catalysts
Recovery in CAG and LPD Arms: Investors are optimistic about the company witnessing consistent strong rebound in organic CAG revenues since the beginning of 2021 driven by strong organic growth in both the United States and in international markets. Continued strength in clinical visits and related diagnostic products and services, along with some benefits from lapping of prior-year COVID-19 impacts late in the reported quarter aided CAG Diagnostics recurring revenues. LPD too is growing organically,banking on strong sales in the Asia Pacific region. LPD results in the first quarter largely benefited from growing sales of diagnostic testing programs for African swine fever. Further, there has been growth in core swine testing volumes in China in the quarter.
ezyVet Acquisition Seems Strategic: Investors are looking forward to IDEXX’slatest acquisition of ezyVet,which is believed to integrate ezyVet’s industry-leading technology with IDEXX's scale and cloud-based innovation to advance technology solutions to customers raising the standard of care for patients, improving veterinary practices and facilitating effective communication with pet owners. With the completion of the acquisition, IDEXX’s three core practice information management system (PIMS) offerings, including Cornerstone Software, Neo Software and ezyVet (as the newest addition), are well suited to support veterinary practices of varying sizes.
Upbeat 2021 Guidance: The raised full-year 2021 guidance as stated by the company during its first-quarter earnings update instills investor confidence in the stock. The company projects revenues for the year to be in the range of $3,105 million-$3,160 million, reflecting growth of 14.5-16.5% and 13-15% on a reported and on an organic basis, respectively. Further, IDEXX projects full-year earnings per share to be in the range of $7.88-$8.18, indicating growth of 17-22% on a reported basis (up from the previously-issued outlook of $7.39-$7.71, indicatinggrowth of 10-14%).
Downsides
On the flip side, there are some factors deterring the stock’s rally of late.
Q1 Sales Drop in a Few Businesses: In the lastreported quarter, the company registered a decline in diagnostic imaging systems revenues,impacted by a year-over-year reduction in generation instrument platform sales denting the overall Veterinary software, services and diagnostic imaging systems’top-line growth. Further, investors are worried about the continued lower organic revenues from the Water segment.
Leveraged Balance Sheet: A weak capital structure does not bode well either. IDEXX exited the first quarter of 2021 with cash and cash equivalents of $351.2 million. Meanwhile, total debt was $903.7 million for the period. The quarter’s total debt-to-capital ratio of 0.56 indicating a leveraged balance sheet adds to investors’ woe.
Zacks Rank & Key Picks
IDEXX Laboratories currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the broader medical space are Envista Holdings Corporation (NVST - Free Report) , BellRing Brands, Inc. (BRBR - Free Report) and Baxter International Inc. (BAX - Free Report) , each carrying a Zacks Rank #2(Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
BellRing Brands has an estimated long-term earnings growth rate of 22%.
Baxter International has a projected long-term earnings growth rate of 9%.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
Download FREE: How to Profit from Trillions on Spending for Infrastructure >>