A month has gone by since the last earnings report for Idexx Laboratories (IDXX). Shares have lost about 0.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Idexx due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
IDEXX Q4 Earnings Beat Estimates, Gross Margin Up
IDEXX Laboratories posted fourth-quarter 2021 earnings per share of $1.89, reflecting a 5.9% year-over-year decline. However, the figure surpassed the Zacks Consensus Estimate by 13.2%.
Comparable constant-currency earnings per share of $1.83 in the fourth quarter of 2021 reflects year-over-year growth of 12.3%.
Full-year earnings per share was $8.60, up 28.2% from the year-ago number. The metric surpassed the Zacks Consensus Estimate by 2.6%.
Revenues in Detail
Fourth-quarter revenues grew 11.1% year over year to $801.1 million. Organically, growth was 10.5%. The metric surpassed the Zacks Consensus Estimate by 2.7%.
The year-over-year upside was primarily driven by 18% reported and 17% organic growth in global Companion Animal Group (CAG) Diagnostics’ recurring revenues and 18% reported and 21% organic growth in CAG Diagnostics capital instrument revenues. Overall revenue growth was also supported by 12% reported and 13% organic revenue growth in the Water business.
Full-year revenues were $3.22 billion, reflecting an 18.8% increase from the year-ago period (up 16% on an organic basis). However, revenues surpassed the Zacks Consensus Estimate by 0.9%.
Segmental Analysis
IDEXX derives revenues from four operating segments — CAG, Water, Livestock, Poultry and Dairy (LPD), and Other.
In the fourth quarter, CAG revenues rose 14.2% (up 13.4% organically) year over year to $719.1 million. The Water segment’s revenues also grew 12.2% (up 12.7% organically) year over year to $37.1 million. However, LPD revenues dropped 20% (down 18.9% organically) to $33.9 million.
Revenues at the Other segment fell 30.7% on a reported basis to $10.9 million.
Margins
Gross profit in the fourth quarter rose 11.5% to $456.4 million. Gross margin expanded 17 basis points (bps) to 56.9% on a 10.7% rise in the cost of revenues to $344.7 million.
Sales and marketing expenses rose 10.8% to $128.5 million, while general and administrative expenses were down 19.7% to $83.5 million. Research and development expenses climbed 16.8% to $45.3 million.
Overall, operating profit in the reported quarter was $199.2 million, reflecting an improvement of 7.6% year over year. Operating margin in the quarter contracted 81 bps to 24.9%.
Financial Position
IDEXX exited 2021 with cash and cash equivalents of $144.4 million compared with $145.2 million recorded at the end of 2020. Total debt (including current portion) at the end of 2021 was $850.2 million compared with total debt of $908.5 million at the end of 2020.
Cumulative net cash provided by operating activities at the end of 2021 was $755.5 million compared with $648.1 million a year ago.
2022 Guidance
The company has initiated 2022 outlook.
For 2022, the company expects revenue growth in the range of $3.50-$3.56 billion, indicating growth of 9-11% on a reported basis (Organic growth of 10-12%). The Zacks Consensus Estimate for the same is currently pegged at $3.53 billion.
CAG Diagnostics’ recurring revenues are expected to grow 10.5-12% on a reported basis and 12-14% on an organic basis.
Further, IDEXX full-year earnings per share guidance is in the range of $9.27-$9.59, indicating growth of 8-11% on a reported basis. The Zacks Consensus Estimate for full-year earnings per share is currently pegged at $9.33.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, Idexx has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Idexx has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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