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IDEXX Gains Ground on Solid CAG Business Amid Forex Woes

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On Sep 7, we issued an updated research report on IDEXX Laboratories, Inc. (IDXX - Free Report) . We are upbeat about this Zacks Rank #3 (Hold) company’s strong Companion Animal Group business growth on the back of global Catalyst One uptake. However, adverse currency movements remain a concern.

Over the past three months, this leading developer, manufacturer and distributer of products and services, primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets, has outperformed its industry. The stock has surged 51.3% against the industry’s 9.5% decrease during this time frame.

IDEXX’s innovation-based, multi-modality global strategy, enabled by enhanced commercial capability has been accelerating recurring CAG Diagnostics revenue growth. In the last reported quarter, CAG revenues rose 13% organically year over year, supported by strong CAG Diagnostics recurring organic revenue growth, high premium CAG instrument placements, and continued solid growth in software, services and diagnostic imaging system businesses.

IDEXX’s VetLab consumables organic revenue growth was also strong, driven by an expanding premium instrument base in the United States and international markets, including growth in competitive instrument placements, increasing utilization and continued strong customer retention.

We encouragingly note that IDEXX has been continuously demonstrating solid growth, globally, with strong international expansion. International revenues in the last reported quarter of 2018 rose in double digits organically, aided by considerable organic gains in international CAG Diagnostics recurring revenues.

Meanwhile, majority of IDEXX’s consolidated revenues have been derived from sale of products in the international markets in 2017. 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 on profits from products manufactured in the United States and sold internationally. For 2018, adverse currency movements are expected to affect the bottom line as well.

Also, intense competition, along with high dependence on third-party distributors, remains a concern for IDEXX.

Key Picks

Some better-ranked stocks in the broader medical space are Integer Holdings Corporation (ITGR - Free Report) , Intuitive Surgical (ISRG - Free Report) and Masimo Corporation (MASI - Free Report) .

Integer Holdings’ expected long-term earnings growth rate is 15%. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock carries a Zacks Rank of 1, currently.

Masimo’s long-term expected earnings growth rate is 14.8%. The stock holds a Zacks Rank #2, at present.

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