IDEXX Laboratories, Inc. (IDXX Quick QuoteIDXX - Free Report) posted fourth-quarter 2023 earnings per share (EPS) of $2.32, up 13.2% year over year. The figure surpassed the Zacks Consensus Estimate by 9.4%.

In the fourth quarter of 2023, comparable constant-currency EPS of $2.34 improved 29% year over year.

Full-year 2023 earnings of $10.06 rose 25% from the 2022 level. The figure exceeded the Zacks Consensus Estimate by 1.9%.

Revenues in Detail

Fourth-quarter revenues increased 8.8% year over year to $901.6 million. Organically, growth was 8%. The metric surpassed the Zacks Consensus Estimate by 1.5%.

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

CAG Diagnostics’ recurring revenues increased 11% on a reported basis and 10% on an organic basis, supported by the sustained benefits of IDEXX execution drivers, including high-quality placement of CAG Diagnostics capital instruments across regions, high customer retention, new business gains and net price realization.

Veterinary software, services and diagnostic imaging systems’ revenues increased 6% on a reported basis as well as organically, reflecting double-digit growth in recurring revenues and a strong interest in its cloud-based veterinary software solution.

Full-year total revenues of $3.66 billion improved 9% on a reported basis as well as organically from the 2022 level, driven by 10% reported and 10.5% organic growth in CAG Diagnostics recurring revenues. The figure beat the Zacks Consensus Estimate by a close margin of 0.3%.

Segmental Analysis

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

In the fourth quarter, CAG revenues rose 10% on a reported basis and 9% on an organic basis year over year to $821.3 million.

The Water segment’s revenues increased 6% (up 5% organically) year over year to $41.8 million.

For the fourth quarter, LPD revenues decreased 2% on a reported basis (down 4% organically) to $32.8 million.             

Revenues from the Other segment fell 21.4% on a reported basis to $5.8 million.

Margins

Gross profit in the fourth quarter rose 8.5% to $526.2 million. However, gross margin contracted 17 basis points (bps) to 58.4% on a 9.3% rise in the cost of revenues to $375.4 million.

Sales and marketing expenses rose 7.7% to $142 million, while G&A expenses increased 4.8% to $87 million.  R&D expenses rose 19.3% to $51.8 million.

Overall, operating profit in the reported quarter was $245.3 million, up 8.3% year over year. The operating margin in the quarter, however, contracted 13 bps to 27.2%.

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise

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

Financial Position

IDEXX exited 2023 with cash and cash equivalents of $453.9 million compared with $112.5 million at the end of 2022. Total debt (including the current portion) at the end of the fourth quarter of 2023 was $697.9 million compared with $769.4 million at the end of the year-ago period.

The cumulative net cash provided by operating activities at the end of 2023 was $906.5 million compared with $542.9 million in the prior-year comparable period.

2024 Guidance

IDEXX provided an updated outlook for 2024.

The company expects total revenues to be in the range of $3.93 billion-$4.04 billion. This suggests growth of 7.5%-10.5% on a reported basis and 7%-10% on an organic basis. The Zacks Consensus Estimate is currently pegged at $3.94 billion.

IDEXX guided full-year EPS in the range of $10.84-$11.33. This updated guidance indicates reported growth of 8%-13%. The Zacks Consensus Estimate for full-year EPS is currently pegged at $11.04.

Our Take

IDEXX exited the fourth quarter of 2023 with earnings and revenue beat. Revenues increased year over year, driven by the benefits of IDEXX’s key execution drivers and solid growth in the global premium instrument platform installed base.

Across testing modalities, IDEXX achieved strong global growth in the fourth quarter. In addition, the strong demand for cloud-based products continued to support momentum in software solution placements and customer gains. The expansion of the operating margin further buoys optimism.

However, rising costs and expenses put pressure on margins.

Zacks Rank and Key Picks

IDEXX Laboratories currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK Quick QuoteSYK - Free Report) , Haemonetics (HAE Quick QuoteHAE - Free Report) and McKesson (MCK Quick QuoteMCK - Free Report) .

Stryker, carrying a Zacks Rank #2 (Buy), reported fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker has an estimated earnings growth rate of 10.9% for 2025. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.

Haemonetics, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted EPS of 99 cents, which beat the Zacks Consensus Estimate by 5.3%. For the third quarter, revenues are expected to increase 5.6% year over year.

HAE has an estimated fiscal 2024 earnings growth rate of 28.4% compared with the industry’s 17.3% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 16.1%.

Mckesson reported third-quarter fiscal 2023 adjusted earnings of $6.90, which beat the Zacks Consensus Estimate by 8.8%. For the fourth quarter, revenues are expected to increase 9.9% year over year. It currently carries a Zacks Rank #2.

MCK has an estimated earnings growth rate of 14% for fiscal 2025 compared with the industry’s 13.5% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.9%.