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IDEXX Laboratories Finishes 2018 Strong

Happy dog lying in grass

IDEXX Laboratories (NASDAQ: IDXX) , a company focused on pet health, water, and livestock products, reported fourth-quarter and full-year earnings on Friday.

The company posted revenue growth of 9%, which represents a slight deceleration from previous quarters. However, the company continues to do a great job at using operating leverage to drive higher rates of growth for the bottom line.

IDEXX Laboratories quarterly results: The raw numbers

Metric Q4 2018 Q4 2017 Year-Over-Year Change
Revenue $549 million $506 million 9%
Net Income $85.6 million $38.3 million 123%
Earnings per share $0.98 $0.43 128%

Data source: IDEXX Laboratories.

Happy dog lying in grass

Image source: Getty Images.

What happened with IDEXX Laboratories this quarter?

  • The companion animals business continues to be the star of the show. Sales in this division grew 10% on a reported basis.
  • Total instrument placements grew 8% to 3,957. The growth was led by its flagship Catalyst product, which posted instrument growth of 10%.
  • Recurring revenue from the companion animal group jumped 12%.
  • Reference laboratory diagnostic revenue grew 11% on an organic basis.
  • IDEXX's water business line grew 8% on an organic basis.
  • The company's livestock division declined 9% on a reported basis, but it grew 5% on an organic basis. Management said that African swine flu outbreaks in China were a major headwind for this business during the quarter.
  • Gross margin increased 90 basis points to 54.7%.
  • Operating margin expanded 170 basis points to 21%.
  • The huge jump in EPS is largely attributable to an elevated tax bill in the year-ago period. Adjusted EPS growth of 40% was still quite strong.

Zooming out to full-year results, here are the headline numbers for investors to see how the company did in 2018:

  • Revenue grew 12% to $2.21 billion.
  • Net income expanded 43% to $377 million.
  • EPS grew 45% to $4.26.

What management had to say

On the call with investors, IDEXX's CEO Jonathan Ayers stated that he was happy with how the company performed in the final quarter of the year:

We finish 2018 with strong revenue growth and impressive bottom line results, even as we're making significant incremental investments and businesses to support our customers and that will generate sustained growth for years to come.

He also talked up certain trends in the marketplace that should continue to drive the company ahead:

Our global opportunity for growth is supported by evolving pet owners' attitudes, particularly with the millennial generation, toward the importance of care for their family members, and by veterinary practices deepening their appreciation for the value of diagnostics in both sick animal and preventive care.

Looking forward

Management took the opportunity to update investors on its expectations for the year ahead, reaffirming its call for revenue growth of 9.5% to 11% on an organic basis during the year. The company also expects to improve its operating margin by 50 to 80 basis points on a currency-neutral basis during the year.

On the bottom line, management is now calling for EPS to land between $4.66 and $4.78, the midpoint of which represents an increase of $0.04 from its prior guidance. It also represents growth of about 15% to 18% year-over-year after adjusting for currency movements.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Idexx Laboratories. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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