IDEXX Laboratories, Inc.
IDXX
has been gaining from consistent international growth. The ongoing strength in the company’s Companion Animal Group (CAG) and Water business buoys optimism. The upbeat revenue and earnings per share (EPS) guidance for full-year 2022 raises investor confidence. However, foreign exchange headwinds and escalating expenses do not bode well.
Over the past year, shares of this Zacks Rank #2 (Buy) company have gained 12.4%, compared to the
industry
’s 1.5% fall. The S&P 500 rose 14.8% during the same period.
The renowned medical device company has a market capitalization of $45.4 billion. Its earnings for fourth-quarter 2021 surpassed the Zacks Consensus Estimate by 13.2%.
Over the past five years, the company registered earnings growth of 26.3%, ahead of the industry’s 5.0% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 13.0%, compared with the industry’s growth expectation of 15.1% and the S&P 500’s estimated 11.4% growth.
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Let’s delve deeper.
Factors at Play
Strong Global Performance:
We are encouraged by IDEXX’s continued solid global growth. In the fourth quarter, international revenues were up 8.4% organically, primarily aided by a double-digit gain in CAG and Water businesses. Global Reference Lab gains in the quarter were strong, driven by solid same-store volume growth. Meanwhile, IDEXX VetLab consumable revenues increased 15% organically, reflecting double-digit gains in the United States and continued high growth in international regions.
In terms of CAG instrument placements, the fourth quarter saw strong gains across the U.S. and international regions. The company registered strong global placement gains across core platforms, with Catalyst up 8%, premium hematology up 72%, and SediVue up 20%.
CAG Continues to Perform Well:
The CAG segment recorded a stellar 13% year-over-year growth in revenues on an organic basis. The upside was driven by organic growth in veterinary software services and diagnostic imaging revenues, benefits from the company’s recent ezyVet acquisition as well as growth in CAG Diagnostic instrument revenues. The company achieved very high levels of supply-chain reliability across its business in the reported quarter. Continued strong U.S. CAG diagnostic recurring revenue growth and new CAG instrument placements raise optimism.
Rapid assay revenues increased 17% organically, supported by high volume gains for canine 4Dx feline and specialty testing. VetLab consumable revenues increased 15%, whereas veterinary software, services and diagnostic imaging system revenues grew 13% on an organic basis.
Upbeat Guidance:
IDEXX’s outlook for 2022 suggests strong growth projections over 2021. The company expects revenue growth in the range of $3.50-$3.56 billion for 2022, indicating growth of 9-11% on a reported basis (organic growth of 10-12%). In addition, EPS guidance is in the range of $9.27-$9.59, indicating growth of 8-11% on a reported basis.
Downsides
Mounting Operating Expenses:
During the fourth quarter, IDEXX’s sales and marketing expenses rose 10.8% while research and development expenses increased 16.8%. These escalating expenses are building significant pressure on the company’s bottom line.
Forex Woes:
The majority of IDEXX’s consolidated revenues are derived from the sale of products in international markets. This makes the company vulnerable to unfavorable fluctuations in foreign currency.
Estimate Trends
IDEXX has been witnessing a positive estimate revision trend for 2022. For the past 60 days, the Zacks Consensus Estimate for IDEXX’s 2022 earnings has moved 0.9% north to $9.45.
The Zacks Consensus Estimate for 2022 revenues is pegged at $3.55 billion, suggesting 10.3% growth from the year-ago quarter’s reported number.
Key Picks
A few better-ranked stocks in the broader medical space are
Henry Schein, Inc.
HSIC
,
AMN Healthcare Services, Inc.
AMN
and
McKesson Corporation
MCK
.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%. It currently has a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
Henry Schein has outperformed the industry over the past year. HSIC has gained 26% compared with the industry’s 7.6% rise over the past year.
AMN Healthcare has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. It currently flaunts a Zacks Rank #1.
AMN Healthcare has outperformed its industry in the past year. AMN has gained 38.5% versus the 53.5% industry decline.
McKesson has a long-term earnings growth rate of 11.8%. McKesson’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 20.6%, on average. It presently carries a Zacks Rank #2.
McKesson has outperformed the industry over the past year. MCK has gained 58.4% in the said period compared with 7.6% growth of the industry.
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