IDEXX Laboratories, Inc.
IDXX
posted first-quarter 2022 earnings per share (EPS) of $2.27, reflecting a 3.4% year-over-year decline. However, the figure surpassed the Zacks Consensus Estimate by 0.9%.
Comparable constant-currency EPS of $2.24 in the first quarter of 2022 reflects year-over-year growth of 2.8%.
Revenues in Detail
First-quarter revenues grew 7.6% year over year to $836.5 million. Organically, growth was 9%. The metric lagged the Zacks Consensus Estimate by 0.5%.
The year-over-year upside was primarily driven by 19% reported and 22% organic growth in CAG Diagnostics capital instrument revenues. Veterinary software, services and diagnostic imaging systems revenues increased 34% as reported and 13% organically. Overall revenue growth was also supported by 7% reported and 8% organic revenue growth in the Water business.
Segmental Analysis
IDEXX derives revenues from four operating segments — CAG, Water, Livestock, Poultry and Dairy (LPD), and Other.
In the first quarter, CAG revenues rose 10% on a reported basis (up 10% organically) year over year to $761.2 million. The Water segment’s revenues also grew 7% (up 8% organically) year over year to $36.4 million. However, LPD revenues dropped 21% (down 19% organically) to $30.9 million. Revenues in the Other segment fell 30.1% on a reported basis to $8.1 million.
Margins
Gross profit in the first quarter rose 5.9% to $498.8 million. Gross margin contracted 91 basis points (bps) to 59.6%, with a 10.1% rise in the cost of revenues to $337.8 million.
IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise
Sales and marketing expenses rose 15.2% to $132.3 million, while general and administrative expenses were down 10.1% to $77.9 million. Research and development expenses climbed 6.9% to $40.2 million.
Overall, operating profit in the reported quarter was $248.3 million, reflecting an improvement of 0.3% year over year. Despite that, operating margin in the quarter contracted 215 bps to 29.7%.
Financial Position
IDEXX exited the first quarter of 2022 with cash and cash equivalents of $204.6 million compared with $144.5 million recorded at the end of the fourth quarter of 2021. Total debt (including current portion) at the end of the first quarter of 2022 was $773.4 million compared with total debt of $850.2 million at the end of the fourth quarter of 2021.
Cumulative net cash provided by operating activities at the end of the first quarter of 2022 was $114.7 million compared with $124.4 million a year ago.
2022 Guidance
The company has re-calibrated its full-year 2022 outlook anticipating near-term impacts on veterinary clinical visits from factors, including constraints on vet clinic capacity as well as projected revenue reductions related to the war in Ukraine and the impact of the recent strengthening of the U.S. dollar.
For 2022, the company now expects revenue growth in the range of $3.39-$3.47 billion, indicating growth of 5.5-8% on a reported basis (organic growth of 7.5-10%). This compares with the previously guided range of $3.50-$3.56 billion The Zacks Consensus Estimate for the same is currently pegged at $3.54 billion.
CAG Diagnostics’ recurring revenues are expected to grow 6.5-8.5% on a reported basis and 9-11% on an organic basis. This compares with the previously guided range of 10.5-12% on a reported basis and 12-14% on an organic basis.
Further, IDEXX’s full-year EPS guidance is now pegged in the range of $8.11-$8.35, indicating a decline of 6-3% on a reported basis. This compares with the previously guided range of $9.27-$9.59. The Zacks Consensus Estimate for full-year EPS is currently pegged at $9.44.
Our Take
IDEXX exited the first quarter of 2022 on a mixed note, with better-than-expected earnings and a revenue miss. The company registered year-over-year growth on both reported and organic basis. The top line was driven by strong sales at the CAG and Water businesses. Strong growth supported by record instrument placements, resulting in year-over-year expansion of IDEXX’s global premium instrument installed base, looks encouraging. The company also registered strong growth in recurring software services revenue supported by continued gains in cloud-based software placements.
On the flip side, LPD revenues declined in the quarter due to comparisons to high prior-year levels and additional impacts in China related to changes in local ASF disease management approaches. Lower pork prices and changes in government requirements related to livestock infectious disease testing programs were the other deterring factors. Further, the escalating operating costs resulting in a contraction in operating margin are concerns.
Zacks Rank and Key Picks
IDEXX currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are
UnitedHealth Group Incorporated
UNH
,
Medpace Holdings, Inc.
MEDP
and
Alkermes plc
ALKS
.
UnitedHealth, having a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 14.2%. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.
Medpace reported first-quarter 2022 adjusted EPS of $1.69, which surpassed the Zacks Consensus Estimate by 34.1%. Revenues of $330.9 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Medpace has a historical growth rate of 27.3%. MEDP’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%.
Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently sports a Zacks Rank #1.
Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.
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