It has been about a month since the last earnings report for Idexx Laboratories (IDXX Quick QuoteIDXX - Free Report) . Shares have lost about 1.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Idexx due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

IDEXX Q2 Earnings and Revenues Beat Estimates, View Up

IDEXX Laboratories posted second-quarter 2023 earnings per share of $2.67, a 71.2% surge year over year. The figure surpassed the Zacks Consensus Estimate by 9.9%.

In the second quarter of 2023, comparable constant-currency EPS of $2.70 improved a huge 76.5% year over year.

Revenues in Detail

Second-quarter revenues increased 9.7% year over year to $943.6 million. Organically, growth was 10%. The metric exceeded the Zacks Consensus Estimate by 1.7%.

The year-over-year upside was primarily driven by 11% reported organic growth in Companion Animal Group (“CAG”) revenues, and 10% reported and 9% organic growth in Water revenues.

CAG Diagnostics’ recurring revenues increased 11% on a reported basis and 12% on an organic basis, supported by double-digit organic revenue growth in the United States and international regions.

Veterinary software, services and diagnostic imaging systems’ revenues increased 12% on a reported basis and 13% organically, reflecting continued high growth in recurring revenues and strong quarterly placements of cloud-based software solutions.

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 11% on a reported and organic basis year over year to $866.7 million.

The Water segment’s revenues increased 10% (up 9% organically) year over year to $43 million.

For the second quarter, LPD revenues were flat on a reported basis (up 1% organically) to $29.9 million.

Revenues in the Other segment fell 45.2% on a reported basis to $4 million.

Margins

Gross profit in the second quarter rose 11.4% to $572.9 million. The gross margin expanded 97 basis points (bps) to 60.7%.

Sales and marketing expenses rose 7.9% to $141 million, while general and administrative expenses increased 10% to $89.7 million.  R&D expenses dropped 62.3% to $46.5 million.

Overall, the operating profit in the reported quarter was $296.1 million, up 65.4% year over year. The operating margin in the quarter expanded 1058 bps to 31.4%.

Financial Position

IDEXX exited the second quarter of 2023 with cash and cash equivalents of $132.8 million compared with $112.5 million recorded as of Dec 31, 2022. The total debt (including the current portion) at the end of the second quarter of 2023 was $771.8 million compared with the total debt of $769.4 million at the end of the first quarter of 2023.

The cumulative net cash provided by operating activities at the end of the second quarter of 2023 was $384.2 million compared with $180.6 million a year ago.

2023 Guidance

IDEXX provided an updated outlook for the full-year 2023.

The company expects total revenues in the range of $3.660 billion-$3.715 billion (the earlier projection was in the band of $3.615 billion-$3.700 billion), indicating growth of 8.5 on a reported and organic basis from the earlier projected growth of 7.5. The Zacks Consensus Estimate for the same is currently pegged at $3.66 billion.

IDEXX’s full-year EPS guidance is now pegged in the range of $9.64-$9.90 (from the previous band of $9.33-$9.75). This updated guidance indicates reported growth of 20, up from the previous projected growth of 16. The Zacks Consensus Estimate for the full-year EPS is currently pegged at $9.64.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Idexx has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Idexx has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Idexx is part of the Zacks Medical - Instruments industry. Over the past month, Intuitive Surgical, Inc. (ISRG Quick QuoteISRG - Free Report) , a stock from the same industry, has gained 1.5%. The company reported its results for the quarter ended June 2023 more than a month ago.

Intuitive Surgical, Inc. reported revenues of $1.76 billion in the last reported quarter, representing a year-over-year change of +15.4%. EPS of $1.42 for the same period compares with $1.14 a year ago.

Intuitive Surgical, Inc. is expected to post earnings of $1.41 per share for the current quarter, representing a year-over-year change of +18.5%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Intuitive Surgical, Inc. Also, the stock has a VGM Score of C.