With a market capitalization of approximately $20.99 billion, IDEXX Laboratories, Inc. (IDXX - Free Report) is a leading developer, manufacturer and distributer of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. We are specifically upbeat about the company's organic revenue growth trend. Its Companion Animal Group (CAG) business also remains strong on global Catalyst One uptake.
Which Way Are Estimates Treading?
For the current quarter, the Zacks Consensus Estimate for earnings is pegged at 98 cents, reflecting an increase of 24.1% on a year-over-year basis. The same for revenues is pinned at $546.9 million, showing an increase of 11.2%.
For 2018, the Zacks Consensus Estimate for earnings stands at $4.18, calling for a year-over-year increase of 27.4%. The same for revenues is pegged at $2.22 billion, showing a rise of 12.9%.
The stock currently has a Zacks Rank #3 (Hold). Here, we take a quick look at the primary factors that have been plaguing IDEXX and discuss the prospects that ensure near-term recovery.
Why Should You Retain IDEXX?
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 expansion growth globally. International revenues in the second quarter of 2018 were up double-digits organically, aided by growing international CAG Diagnostics recurring revenues. This reflected continued consumable revenue gains supported by Catalyst instrument base, increased average testing utilization and strong growth in European lab revenues.
Furthermore, its commitment to return more to shareholders through increased repurchases reflects its solid cash position.
What's Hurting the Stock?
Majority of IDEXX’s consolidated revenues has been derived from the 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 third-quarter 2018, adverse currency movements are expected to affect revenue growth by 2%.
Also, intense competition along with high dependence on third-party distributors remains a concern.
Consequently, IDEXX has underperformed the industry in the past month. The company’s shares have returned 0.9% in comparison to the industry's gain of 4.3%. The current level is lower than the S&P 500’s return of 1.4%.
Some better-ranked stocks in the broader medical space are Intuitive Surgical (ISRG - Free Report) , Amedisys, Inc. (AMED - Free Report) and Masimo Corporation (MASI - Free Report) .
Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock currently carries a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Amedisys’ long-term expected earnings growth rate is 18.6%. The stock holds a Zacks Rank #1 at the moment.
Masimo’s long-term expected earnings growth rate is 14.8%. The stock holds a Zacks Rank #2 at present.
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