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IDEXX's (IDXX) Catalyst Uptake Remains Strong & Boosts CAG

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On May 28, we issued an updated research report on IDEXX Laboratories, Inc. (IDXX - Free Report) . The company’s robust worldwide commercial capabilities and best-in-class products including the next-generation chemistry analyzer, Catalyst One, are key growth drivers over the near term. The stock carries a Zacks Rank #3 (Hold).

This leading molecular diagnostic company has outperformed its industry. The stock has increased 11.6% against the industry’s 13% decrease.

Notably, IDEXX exited the first quarter of 2018 on a strong note with better-than-expected earnings and revenue improvement. Solid year-over year growth in organic revenues and a raised EPS guidance for 2018 were also encouraging. This stellar performance was driven by robust sales at the Companion Animal Group (CAG) business, fueled by a firm global Catalyst uptake.

 

 

International revenues in the first quarter were up 11% organically, driven by 13% organic gains in international CAG Diagnostics recurring revenues. This reflected continued consumable revenue gains, supported by Catalyst instrument base, increased average testing utilization and sturdy growth in European lab revenues.

The companion animal market fundamentals remain safe and sound with tremendous global runway for growth. Additionally, we are upbeat about the company’s expanding premium instrument base in the United States as well as the international markets including growth in competitive instrument placements, increasing utilization and a consistent customer retention.

IDEXX’s innovation-based, multi-modality global strategy enabled by enhanced commercial capability accelerated recurring CAG Diagnostics revenue growth in the reported quarter. Moreover, the company’s healthy top-line growth was driven by considerable contributions from its rest of the business segments.

Additionally, the company boasts a strong cash balance, which allows it to carry out share repurchases.

Meanwhile, majority of IDEXX’s consolidated revenues is being derived from sale of products in the international markets. Thus, the strengthening of the U.S. dollar’s exchange rate, relative to other currencies, had a negative impact on revenues derived in currencies other than the U.S. money as well as on profits drawn from products manufactured in the United States and sold internationally. For 2018, adverse currency translations affected adjusted earnings per share to the tune of 4 cents. Also, the company’s heavy dependence on third-party distributors is a drag.

Key Picks

A few better-ranked stocks in the broader medical sector are Intuitive Surgical (ISRG - Free Report) , Illumina, Inc (ILMN - Free Report) and Amedisys, Inc. (AMED - Free Report) . While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Amedisys carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical has an expected long-term earnings growth rate of 12.1%.

Illumina has an expected long-term earnings growth rate of 20%.

Amedisys has an expected long-term earnings growth rate of 17.5%.

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