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Here's Why You Should Invest in IDEXX (IDXX) Stock Right Now
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IDEXX Laboratories, Inc. (IDXX - Free Report) is well-poised to grow in the coming quarters, backed by the consistent strong performance of the CAG (Companion Animal Group) segment. The company’s cloud-based offerings continue to see robust demand, helping clinics enhance their focus on improving patient care rather than back-office tasks. ProCyte One has significantly contributed to the strong placement of premium hematology instruments, which is encouraging.
However, the impact of third-party distributors and macroeconomic challenges remain our concerns for IDEXX’s operations.
In the past year, this Zacks Rank #3 (Hold) stock has increased 8.8% compared with the 11% rise of the industry and the 27.8% growth of the S&P 500 composite.
The renowned medical device company has a market capitalization of $44.8 billion. IDEXX has an estimated long-term earnings growth rate of 16.4% compared with the industry’s 14.2%. IDXX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.30%.
Let’s delve deeper.
Upsides
CAG Continues to Perform Well: IDEXX generates a mix of recurring and non-recurring revenues from offering advanced diagnostic capabilities to meet veterinarians’ diverse needs, including in-clinic diagnostic solutions and outside reference laboratory services. In the fourth quarter of 2023, IDEXX's CAG Diagnostics recurring revenues increased 10% organically, supported by an average global net price improvement of 6% to 7%. The quarter also represented the strongest normalized volume growth quarter for IDEXX in 2023.
Image Source: Zacks Investment Research
Once again, growth remained solidly above sector growth levels. In the United States, volume growth was supported by new business gains, high customer retention levels and continued increases in diagnostic frequency and utilization per clinical visit at the practice level. International CAG Diagnostics’ recurring revenue growth improved organically to 12%, reflecting positive volume gains and benefits from higher net price realization.
Cloud-Based Software in Trend: IDEXX cloud-based products, including ezyVet and NEO PIMS (practice information management systems) and Web PACS's imaging software, continue to be in high demand. These solutions enable occupied clinics to focus more on patients and less on time-consuming back-office tasks. PIMS placements continued to be driven by an interest in cloud-native products, representing more than 90% of placements in the fourth quarter of 2023.
Further, the company’s cloud-native workflow engine for digital imaging, IDEXX Web PACS, is generating strong subscriber growth. IDEXX recently closed the acquisition of a private U.S.-based software and data platform, which extends its PIMS cloud-native workflow. The company’s software innovation is deeply integrated with its approaches to diagnostics innovations, as evidenced by its highly successful instrument platform strategy, enabled by cloud-based capabilities and connectivity that enhance practice insight and workflow.
ProCyte One, a Long-Term Growth Component: IDEXX’s customer-friendly hematology analyzer, ProCyte One, has been a key driver of strong premium hematology placements. ProCyte One boosts efficiency gains, including load and go reagents in paper-run models, while still delivering uncompromised accuracy.
The expanding installed base in hematology not only facilitates the flow-through of recurring revenues but also propels the clinic business. Additionally, ProCyte One aligns with the company’s long-term growth goal in international markets, where most veterinarians are qualified to perform hematology testing when determining a patient's general health.
Downsides
Impacts of Third-Party Distribution: The company’s CAG segment sells instrument consumables and rapid assay products through third-party distributors who purchase products from IDEXX and sell them to veterinary practices. The purchasing dynamics of these distributors can be affected by many factors that are not directly related to the underlying end-user demand for products and, thus, have an impact on the company’s reported sales of these products. As a consequence, reported results may reflect fluctuations in inventory levels held by distributors and may not necessarily mirror changes in the underlying end-user demand.
Macroeconomic Headwinds Put Pressure on the Bottom Line: Global macroeconomic conditions, including inflation, supply-chain disruptions, foreign currency fluctuations and market volatility, could continue to negatively affect IDEXX’s results of operations. These challenges, along with geopolitical instability, such as the war in Ukraine, have affected IDEXX’s supply chain operations globally.
With sustained inflation, the company may struggle to control its cost of revenues and operating expenses. During the fourth quarter of 2023, IDXX’s sales and marketing expenses increased 7.7%, while general and administrative expenses rose 19.3% year over year.
Estimate Trend
The Zacks Consensus Estimate for IDEXX’s 2024 earnings per share (EPS) has moved up to $11.15 from $11.13 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $3.99 billion. This suggests a 9% rise from the year-ago reported number.
DaVita has a long-term estimated earnings growth rate of 12.1% compared with the industry’s 11.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. Its shares have rallied 66.5% compared with the industry’s 23.4% rise in the past year.
Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has estimated long-term earnings growth rate 14.2% compared with the industry’s 11.6%. Shares of the company have increased 46.1% compared with the industry’s 11.7% rise over the past year.
CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. In the last reported quarter, it delivered an average earnings surprise of 16.7%.
Stryker, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 11.7% for the next year compared with the S&P 500’s 8%. Shares of SYK have increased 23.3% compared with the industry’s 4.6% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%. In the last reported quarter, it delivered an average earnings surprise of 5.8%.
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Here's Why You Should Invest in IDEXX (IDXX) Stock Right Now
IDEXX Laboratories, Inc. (IDXX - Free Report) is well-poised to grow in the coming quarters, backed by the consistent strong performance of the CAG (Companion Animal Group) segment. The company’s cloud-based offerings continue to see robust demand, helping clinics enhance their focus on improving patient care rather than back-office tasks. ProCyte One has significantly contributed to the strong placement of premium hematology instruments, which is encouraging.
However, the impact of third-party distributors and macroeconomic challenges remain our concerns for IDEXX’s operations.
In the past year, this Zacks Rank #3 (Hold) stock has increased 8.8% compared with the 11% rise of the industry and the 27.8% growth of the S&P 500 composite.
The renowned medical device company has a market capitalization of $44.8 billion. IDEXX has an estimated long-term earnings growth rate of 16.4% compared with the industry’s 14.2%. IDXX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.30%.
Let’s delve deeper.
Upsides
CAG Continues to Perform Well: IDEXX generates a mix of recurring and non-recurring revenues from offering advanced diagnostic capabilities to meet veterinarians’ diverse needs, including in-clinic diagnostic solutions and outside reference laboratory services. In the fourth quarter of 2023, IDEXX's CAG Diagnostics recurring revenues increased 10% organically, supported by an average global net price improvement of 6% to 7%. The quarter also represented the strongest normalized volume growth quarter for IDEXX in 2023.
Image Source: Zacks Investment Research
Once again, growth remained solidly above sector growth levels. In the United States, volume growth was supported by new business gains, high customer retention levels and continued increases in diagnostic frequency and utilization per clinical visit at the practice level. International CAG Diagnostics’ recurring revenue growth improved organically to 12%, reflecting positive volume gains and benefits from higher net price realization.
Cloud-Based Software in Trend: IDEXX cloud-based products, including ezyVet and NEO PIMS (practice information management systems) and Web PACS's imaging software, continue to be in high demand. These solutions enable occupied clinics to focus more on patients and less on time-consuming back-office tasks. PIMS placements continued to be driven by an interest in cloud-native products, representing more than 90% of placements in the fourth quarter of 2023.
Further, the company’s cloud-native workflow engine for digital imaging, IDEXX Web PACS, is generating strong subscriber growth. IDEXX recently closed the acquisition of a private U.S.-based software and data platform, which extends its PIMS cloud-native workflow. The company’s software innovation is deeply integrated with its approaches to diagnostics innovations, as evidenced by its highly successful instrument platform strategy, enabled by cloud-based capabilities and connectivity that enhance practice insight and workflow.
ProCyte One, a Long-Term Growth Component: IDEXX’s customer-friendly hematology analyzer, ProCyte One, has been a key driver of strong premium hematology placements. ProCyte One boosts efficiency gains, including load and go reagents in paper-run models, while still delivering uncompromised accuracy.
The expanding installed base in hematology not only facilitates the flow-through of recurring revenues but also propels the clinic business. Additionally, ProCyte One aligns with the company’s long-term growth goal in international markets, where most veterinarians are qualified to perform hematology testing when determining a patient's general health.
Downsides
Impacts of Third-Party Distribution: The company’s CAG segment sells instrument consumables and rapid assay products through third-party distributors who purchase products from IDEXX and sell them to veterinary practices. The purchasing dynamics of these distributors can be affected by many factors that are not directly related to the underlying end-user demand for products and, thus, have an impact on the company’s reported sales of these products. As a consequence, reported results may reflect fluctuations in inventory levels held by distributors and may not necessarily mirror changes in the underlying end-user demand.
Macroeconomic Headwinds Put Pressure on the Bottom Line: Global macroeconomic conditions, including inflation, supply-chain disruptions, foreign currency fluctuations and market volatility, could continue to negatively affect IDEXX’s results of operations. These challenges, along with geopolitical instability, such as the war in Ukraine, have affected IDEXX’s supply chain operations globally.
With sustained inflation, the company may struggle to control its cost of revenues and operating expenses. During the fourth quarter of 2023, IDXX’s sales and marketing expenses increased 7.7%, while general and administrative expenses rose 19.3% year over year.
Estimate Trend
The Zacks Consensus Estimate for IDEXX’s 2024 earnings per share (EPS) has moved up to $11.15 from $11.13 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $3.99 billion. This suggests a 9% rise from the year-ago reported number.
Key Picks
Some better-ranked stocks from the broader medical space are DaVita (DVA - Free Report) , Cardinal Health (CAH - Free Report) , Stryker (SYK - Free Report) .
DaVita has a long-term estimated earnings growth rate of 12.1% compared with the industry’s 11.3%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 35.6%. Its shares have rallied 66.5% compared with the industry’s 23.4% rise in the past year.
DVA sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has estimated long-term earnings growth rate 14.2% compared with the industry’s 11.6%. Shares of the company have increased 46.1% compared with the industry’s 11.7% rise over the past year.
CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%. In the last reported quarter, it delivered an average earnings surprise of 16.7%.
Stryker, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 11.7% for the next year compared with the S&P 500’s 8%. Shares of SYK have increased 23.3% compared with the industry’s 4.6% rise over the past year.
SYK’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 5.1%. In the last reported quarter, it delivered an average earnings surprise of 5.8%.