IDEXX Laboratories
’
IDXX
robust worldwide commercial capabilities, along with a sturdy CAG arm, have turned into key growth drivers for the company. Yet, the company is suffering from currency fluctuations along with high dependence on third-party distributors. The stock carries a Zacks Rank #3 (Hold) at present.
Over the past year, IDEXX has been outperforming its
industry
with respect to share price movement. The stock has gained 1.6% against the 2.3% rise of the industry.
IDEXX exited the fourth quarter of 2021 with better-than-expected results. Its organic revenue growth was encouraging. The top line was driven by strong sales at the CAG and Water businesses. Solid growth, supported by record instrument placements, resulting in year-over-year expansion of IDEXX’s global premium instrument installed base, looks encouraging.
The company witnessed continued high CAG Diagnostics recurring revenue growth across major regions with solid gains across its key in-clinic platforms.
CAG Diagnostic recurring revenues in the reported quarter reflected 14% growth in international regions. On a two-year basis, the average annual CAG Diagnostic recurring revenue growth was 13% overall, reflecting 17% gains in both the U.S. and international regions. Further, Global Reference Lab gains were strong, driven by solid same-store volume growth, including benefits from the expansion of IDEXX 360 program agreements.
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IDEXX VetLab consumable revenues increased 15% organically in the fourth quarter, reflecting double-digit gains in the United States and continued high growth in international regions. In terms of CAG instrument placements, the quarter reflected strong gains across the United States 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%.
On the flip side, in the fourth quarter, IDEXX’s LPD revenues declined 18.9% organically, constrained by comparisons to high prior-year levels and additional impacts in China and changes in local African Swine Fever (ASF) disease management approaches, lower pork prices and changes in government requirements related to livestock infectious disease testing programs.
Further, the contraction of gross margin and escalating operating costs are concerns. Gross margin contracted 17 basis points (bps) to 56.9% on a 10.7% rise in the cost of revenues. Further, sales and marketing expenses rose 10.8%. Research and development expenses increased 16.8% in the fourth quarter.
The instrument consumables and rapid assay products in the company’s Companion Animal Group (CAG) segment are sold domestically and in certain other geographies by third-party distributors who purchase products from IDEXX and sell them to veterinary practices, which are the end users. 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, which may not be directly related to the underlying end-user demand for the products. Consequently, reported results may reflect fluctuations in inventory levels held by distributors and may not necessarily mirror changes in underlying end-user demand.
Key Picks
A few better-ranked stocks in the broader medical space are
Owens & Minor, Inc.
OMI
,
Abiomed, Inc.
ABMD
and
McKesson Corporation
MCK
.
Owens & Minor has a long-term earnings growth rate of 8.8%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 29.5%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see
the complete list of today’s Zacks #1 Rank stocks here.
Owens & Minor has outperformed the industry over the past year. OMI has gained 15.3% against a 15.6% industry decline in the said period.
Abiomed has an estimated long-term growth rate of 20%. Abiomed’s earnings surpassed estimates in the trailing four quarters, the average surprise being 9.2%. It currently carries a Zacks Rank #2.
Abiomed has underperformed the industry over the past year. ABMD has lost 5.5% against the industry’s 1% growth over the past year.
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 69.9% in the said period compared with 9.7% growth of the industry.
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