IDEXX Laboratories, Inc.’s IDXX consistent strong performance of the CAG (Companion Animal Group) segment is poised to help it grow in the upcoming quarters. Robust demand for its cloud-based offerings instills optimism, reflecting the company’s focus on improving patient care rather than back-office tasks. Solid performance in the international markets is encouraging. However, unfavorable solvency and the impact of third-party distributors remain our concerns for IDEXX’s operations.
In the past year, this Zacks Rank #3 (Hold) stock has decreased 12.5% against the 14.5% rise of the industry and the 30% growth of the S&P 500 composite.
The renowned medical device company has a market capitalization of $9.18 billion. IDEXX has an earnings yield of 2.49%, which compares favorably with the industry’s -6.05% yield. IDEXX’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 0.85%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Let’s delve deeper.
Upsides for IDXX
Strength in CAG: The company’s long-term success in CAG recurring diagnostic products and services depends upon the growing volumes of existing customers by increasing their utilization of existing and new test offerings, acquiring new customers, maintaining high customer loyalty and retention, and realizing modest annual price increases. In the third quarter of 2024, CAG Diagnostics’ recurring revenues increased 7% organically, supported by an average global net price improvement of approximately 5%, with the U.S. net price realization of approximately 4%. Also, recurring revenue growth was driven by 10% international organic gains.
The company generated substantial revenues and margins from selling consumables used in IDEXX VetLab instruments. Veterinary software and diagnostic imaging revenues increased 11% on a reported basis, including the benefits of a recent Greenline software and data platform acquisition.
Cloud-Based Software in Trend: IDEXX is driven by the huge demand for medical services to develop its software solutions. Its cloud-based products, including ezyVet, Animana, Cornerstone, IDEXX NEO, DVMAX PIMS (practice information management systems) and Web PACS (picture archiving and communication system imaging software), continue to be in high demand in response to this trend. These software solutions are boosting innovation-driven growth by improving clinic workflows and supporting greater utilization of diagnostics.
In the third quarter, the company experienced strong growth in cloud-based product placements, comprising more than 95% of total software placements. The growing acceptance of the new Vello software solution is encouraging. IDEXX is also building on the robust features of its customer engagement solution by integrating Greenline Pet, a digital platform acquired in the first quarter.
Image Source: Zacks Investment Research
Strong Global Performance: In late 2023, the company expanded its operations in the United States for the first time in four years, complementing the seven international expansions it has advanced since 2021. Through these strategic investments, the company is bolstering its future growth prospects by delivering high-touch commercial engagement in the fastest-growing regions while maintaining strong business performance. This expanded global commercial capability is yielding strong results overseas, with notable 10% organic growth in international CAG diagnostic recurring revenues in the third quarter of 2024.
The company is particularly witnessing strong global gains in consumable revenues banking on strong gains across its Catalyst, Premium Hematology and SediVue platforms. The company's Water segment revenues increased 13% organically in the third quarter, aided by strong performance in Europe.
Concerns for IDXX
Solvency Position: IDEXX closed the third quarter with cash and cash equivalents of $308.6 million and an even higher short-term debt of $349 million. Long-term debt (net of the current portion) dropped 10.2% sequentially to $623.9 million but remained higher than the cash levels. At the quarter end, times interest earned of 34.2X was better than the second quarter’s 32.3X.
Impact of Third-Party Distribution: Instrument consumables and rapid assay products in the company’s CAG segment are sold domestically and in certain other geographies by third-party distributors. As a result, distributor purchasing dynamics have an impact on the company’s reported sales of these products. Distributor purchasing dynamics can be affected by many factors that may not be directly related to the underlying end-user demand for the products. Reported results may reflect fluctuations in inventory levels held by distributors and may not necessarily mirror changes in the underlying end-user demand.
IDXX Stock Estimate Trend
The Zacks Consensus Estimate for IDEXX’s 2024 earnings per share (EPS) has moved down 1 cent to $10.43 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $3.88 billion. This suggests a 5.9% rise from the year-ago reported number.
Key MedTech Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Boston Scientific BSX and Penumbra PEN.
Haemonetics has an earnings yield of 5.41% compared to the industry’s 1.75% yield. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 2.82%. Its shares have risen 1.8% compared with the industry’s 23.1% growth in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 13.8%. Shares of the company have surged 60.2% compared with the industry’s 23.1% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.29%.
Penumbra, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 35.3% for 2024 compared with the industry’s 12.8%. Shares of Penumbra have risen 3.8% compared with the industry’s 14.5% growth over the past year. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 10.54%.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Boston Scientific Corporation (BSX) : Free Stock Analysis Report
Haemonetics Corporation (HAE) : Free Stock Analysis Report
IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report
Penumbra, Inc. (PEN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
