IDEXX Laboratories, Inc. ( IDXX Quick Quote IDXX - Free Report) is gaining investors’ confidence, backed by the performance of the company’s CAG (Companion Animal Group) arm. In the first quarter, key execution metrics remained strong globally, reflecting premium instrument placements, continued solid new business gains and sustained high growth in recurring veterinary software revenues. However, mounting expenses and a negative foreign currency impact are worrisome.
In the past year, this Zacks Rank #3 (Hold) stock has increased 23.5% against the 1% rise of the
industry and a 3.3% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $39.03 billion. IDEXX has an estimated long-term earnings growth rate of 17.3% compared with the industry’s 14.4%. IDXX’s earnings surpassed estimates in all the trailing four quarters, delivering an average surprise of 5.15%.
Let’s delve deeper.
Upsides CAG Continues to Perform Well: IDEXX registered stellar revenue growth within the CAG segment in the first quarter. CAG Diagnostics’ recurring revenue growth was supported by global net price gains in the 8%-9% range, consistent with the company’s expectations. Within the United States, new business gains, high customer retention levels and continued increases in diagnostic frequency and utilization at the practice level resulted in robust volume growth.
Internationally, recurring revenue gains were driven by strong IDEXX execution, higher net price realization, sustained new business gains and a double-digit expansion of the premium instrument installed base.
Image Source: Zacks Investment Research Strong Global Performance: Internationally, IDEXX achieved strong organic revenue growth across its modalities in the first quarter. IDEXX VetLab consumables revenues witnessed double-digit gains in the United States and international regions.
Consumable gains were supported by year-over-year growth in the global premium instrument installed base. This reflected double-digit increases across the Catalyst, Premium Hematology and SediVue platforms.
The quality of CAG premium instrument placements continues to be excellent, reflecting 7% growth in new and competitive Catalyst placements. The company’s newest hematology analyzer, ProCyte One held its momentum globally, reflecting a global installed base that more than doubled over the last year.
The global expansion of rapid assay organic revenues was driven by solid volume gains and benefits from higher net price realization in the United States. Global organic lab revenues registered mid-single-digit growth in international regions.
Solid Execution of Growth Strategy Drives Q1 Performance: IDEXX’s first-quarter top line was driven by the continued solid demand for veterinary services and benefits from strong IDEXX execution. The company sustained another record quarter for global premium instrument placements led by its commercial teams. We are encouraged to see strong growth in Catalyst placements at new and competitive accounts globally, driving solid EVI achievements.
Commercial execution is supported by the multiplier benefits that flow from IDEXX innovations, as evidenced by the success of ProCyte One. For IDEXX, commercial expansion remains an important early step for the international strategy, supporting recent efforts to optimize the reference lab network, roll out highly relevant products like ProCyte One and drive the adoption of software tools like the cloud-based diagnostic portal, VetConnect PLUS.
Downsides Foreign Exchange Headwinds: The majority of IDXX’s consolidated revenues are derived from the sale of products in international markets. Thus, the strengthening of the rate of exchange for the U.S. dollar relative to other currencies had a negative impact on the company’s revenues derived in currencies other than the U.S. dollar and profits from products manufactured in the United States and sold internationally. Weak Solvency & Capital Structure: At the first quarter-end, IDEXX had total debt of $771.3 million, much higher than the corresponding cash and cash equivalents of $111.4 million.
IDEXX’s total debt-to-capital of 47.8% stands at a moderately high level right now. The industry’s debt-to-capital of 30.9% stands lower than the company.
IDEXX has been witnessing a positive estimate revision trend for 2023. The Zacks Consensus Estimate for 2023 earnings per share (EPS) has moved up from $9.57 to $9.65 in the past 60 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $3.66 billion. This suggests an 8.6% rise from the year-ago reported number.
Some better-ranked stocks in the broader medical space are
Zimmer Biomet ( ZBH Quick Quote ZBH - Free Report) , Penumbra ( PEN Quick Quote PEN - Free Report) and Hologic, Inc. ( HOLX Quick Quote HOLX - Free Report) .
Zimmer Biomet has an earnings yield of 5.74% compared to the industry’s -2.37%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%. Its shares have increased 10.2% against the industry’s 31.1% decline in the past year.
ZBH carries a Zacks Rank #2 (Buy) at present. You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Penumbra, sporting a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra shares have risen 130% compared with the industry’s 2.6% increase over the past year.
PEN’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 at present, has an earnings yield of 4.92% compared to the industry’s -6.92%. Shares of HOLX have risen 5.3% compared with the industry’s 2.6% growth over the past year.
Hologic’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.