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IDEXX Laboratories (IDXX) Beats on Q3 Earnings, EPS View Up

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IDEXX Laboratories, Inc. (IDXX - Free Report) reported third-quarter 2018 earnings per share (EPS) of $1.05, up 32.9% year over year on a reported basis and 39% on a comparable constant exchange rate (CER) basis. The figure also surpassed the Zacks Consensus Estimate of 98 cents by 7.1%.

Revenues in Detail

Revenues rose 10.9% year over year (up 12% on organic basis) to $545.4 million. However, the metric was somewhat in line with the Zacks Consensus Estimate.

The upside was driven by strong global gains in Companion Animal Group (CAG) Diagnostics recurring revenues, including high-teens revenue gains in IDEXX VetLab across consumable and double-digit reference laboratory diagnostic and consulting services. Further, steady rapid assay sales growth contributed to the top line.

Segmental Analysis

IDEXX derives revenues from four operating segments: CAG; Water; Livestock, Poultry and Dairy (LPD); and Other.

In the third quarter, CAG revenues rose 12% (up 12.9% organically) year over year to $478.1 million. Water segment’s revenues were up 6.7% from the prior-year quarter (up 8.9% organically) to $33.1 million. LPD revenues grew 3.6% (up 7% organically) to $29.4 million. Revenues at the Other segment declined 17.7% on a reported basis to $4.8 million.


Gross profit increased 11.5% to $305.6 million in the reported quarter in spite of a 10% rise in cost of revenues to $239.8 million. Accordingly, gross margin expanded 30 basis points (bps) to 56%.

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise


Sales and marketing expenses rose 7.1% to $95.1 million, while general and administrative expenses increased 11.9% to $64 million. Research and development expenses rose 5.8% to $29.2 million. Operating margin in the quarter improved 110 bps to 21.5%.

Financial Position

IDEXX exited the third quarter of 2018 with cash and cash equivalents of $146.9 million, compared with $174.6 million at the end of the second quarter. Net cash provided by operating activities was $264.4 million for the nine months ending Sep 30, 2018, compared with $252.2 million in the year-ago period.

2018 Guidance Updated

IDEXX has lowered the high end of its 2018 revenue outlook to the range of $2,205-$2,215 million (earlier $2,205-$2,230 million). Moreover, the company has lowered the high end of its 2018 revenue organic growth guidance to 11.5-12% from the previous 11.5-12.5%. The Zacks Consensus Estimate for 2018 revenues is pegged at $2.22 billion.

Management raised the EPS guidance to $4.16-$4.21 from the earlier $4.10-$4.20, supported by continued operating margin expansion and expected rise in share-based compensation tax benefits. The updated outlook represents EPS growth of 41-43% on a reported basis compared with 39-43% stated previously. The Zacks Consensus Estimate for 2018 adjusted EPS is pegged at $4.19, within the guided range.

2019 Preliminary Outlook Initiated

IDEXX also provided a preliminary guidance for 2019. Full-year revenues are expected in the range of $2,385-$2,425 million, reflecting organic revenue growth of 9.5-11% (reported 8-9.5%). EPS, in the meanwhile, is projected in the range of $4.61-$4.75, reflecting annualized growth of 15-18% (constant currency) or 10–14% (reported). The current Zacks Consensus Estimate for EPS stands at $4.86 on revenues of $2.44 billion.

Our Take

IDEXX exited the third quarter on a mixed note. However, solid year-over year growth in organic revenues and a raised EPS guidance for 2018 are encouraging. The company also witnessed strong Catalyst chemistry analyzer placements in the quarter.

The top-line in the quarter was driven by strong sales at the CAG business. The companion animal market fundamentals remain solid with tremendous global runway for growth. Management’s innovation-based, multi-modality global strategy, enabled by enhanced commercial capability, accelerated recurring CAG Diagnostics revenue growth.

Zacks Rank & Key Picks

IDEXX has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Intuitive Surgical (ISRG - Free Report) , Stryker Corporation (SYK - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical reported third-quarter 2018 adjusted EPS of $2.83, which beat the Zacks Consensus Estimate of $2.65. Revenues totaled $920.9 million, also surpassing the consensus estimate of $918.6 million.

Stryker posted third-quarter 2018 adjusted EPS of $1.69, steering past the Zacks Consensus Estimate of $1.68. Operating margin was 17.8%, up 30 bps.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, which trumped the Zacks Consensus Estimate of 42 cents. Revenues of $221.6 million edged past the consensus estimate of $218 million.

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