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IDEXX (IDXX) Q2 Earnings Surpass Estimates, 2022 View Down

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IDEXX Laboratories, Inc. (IDXX - Free Report) posted second-quarter 2022 earnings per share (EPS) of $1.56, reflecting a 33% year-over-year plunge. However, the figure surpassed the Zacks Consensus Estimate by 1.3%.

Comparable constant-currency EPS of $1.58 for the second quarter of 2022 reflects a year-over-year decline of 30%.

Revenues in Detail

Second-quarter revenues grew 4.2% year over year to $860.5 million. Organically, growth was 6.5%. The metric lagged the Zacks Consensus Estimate by 0.5%.

The year-over-year upside was primarily driven by 4% reported and 7% organic growth in CAG Diagnostics recurring revenue growth. CAG Diagnostics capital instrument revenues grew 3% as reported and 8% organically. This was based on strong companion animal sector demand and benefits from IDEXX execution that drove premium instrument placements 18% higher than the year-ago period.

Veterinary software, services and diagnostic imaging systems revenues increased 27% as reported and 14% organically. Overall revenue growth was also supported by 5% reported and 9% organic revenue growth in the Water business.

Segmental Analysis

IDEXX derives revenues from four operating segments — CAG, Water, Livestock, Poultry and Dairy (LPD), and Other.

In the second quarter, CAG revenues rose 5% on a reported basis (up 7% organically) year over year to $784.1 million. The Water segment’s revenues also grew 5% (up 9% organically) year over year to $39.2 million. However, LPD revenues dropped 11% (down 5% organically) to $29.9 million. Revenues in the Other segment fell 24.9% on a reported basis to $7.4 million.

Margins

Gross profit in the second quarter rose 5.1% to $514 million. Gross margin expanded 51 basis points (bps) to 59.7%, despite a 2.9% rise in the cost of revenues to $346.5 million.

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise

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

Sales and marketing expenses rose 9.4% to $130.3 million, while general and administrative expenses were up 11.1% to $81.5 million.  Research and development expenses climbed 226.9% to $123.2 million.

Overall, operating profit in the reported quarter was $179.1 million, reflecting a 30.9% fall year over year. The operating margin in the quarter contracted 1057 bps to 20.8%.

Financial Position

IDEXX exited the second quarter of 2022 with cash and cash equivalents of $114.4 million compared with $204.6 million recorded at the end of the first quarter of 2022. Total debt (including the current portion) at the end of the second quarter of 2022 was $767.9 million compared with a total debt of $773.4 million at the end of Q1.

Cumulative net cash provided by operating activities at the end of the second quarter of 2022 was $180.6 million compared with $358.4 million a year ago.

2022 Guidance

The company has updated its full-year 2022 outlook.

For 2022, the company now expects revenue growth in the range of $3,305-$3,385 million (earlier projection was $3.39-$3.47 billion), indicating growth of 3-5.5% (5.5-8%) on a reported basis and organic growth of 5.5-8.5% (7.5-10%). The Zacks Consensus Estimate for the same is currently pegged at $3.42 billion.

Further, IDEXX’s full-year EPS guidance is now pegged in the range of $7.77-$8.05 ($8.11-$8.35), indicating a decline of 6-10% (3-6%) on a reported basis. The Zacks Consensus Estimate for full-year EPS is currently pegged at $8.16.

Our Take

IDEXX exited the second quarter of 2022 on a mixed note, with earnings beating estimates but  revenues missing the same. The company registered year-over-year growth in revenues on both reported and organic basis. The top line was driven by strong sales at the CAG and Water businesses. Growth was supported by record instrument placements, resulting in year-over-year expansion of IDEXX's global premium instrument installed base, which is encouraging.

On the flip side, LPD revenues declined in the quarter due to comparisons to high prior-year levels and additional impacts in China. Further, the escalating operating costs resulting in a contraction in the operating margin are concerns. According to the company, $80 million of discrete R&D investment in the quarter and operating expense growth related to investments in commercial capabilities put pressure on the bottom line. A lowered 2022 guidance adds to the concern.

Zacks Rank and Key Picks

IDEXX currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated (DGX - Free Report) , Humana Inc. (HUM - Free Report) and Alkermes plc (ALKS - Free Report) .

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 7.1% compared with the industry’s 3.3%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Humana, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $8.67, which beat the Zacks Consensus Estimate by 13%. Revenues of $23.7 billion outpaced the consensus mark by 1.2%.

Humana has an estimated long-term growth rate of 13.5%. HUM’s earnings surpassed estimates in all the trailing four quarters, the average being 9.1%.

Alkermes reported second-quarter 2022 adjusted EPS of 6 cents, which surpassed the Zacks Consensus Estimate by 50%. Second-quarter revenues of $276.2 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.

Alkermes has an estimated long-term growth rate of 24.9%. ALKS’s earnings surpassed estimates in all the trailing four quarters, the average being 325.5%.