July 15, 2024

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Why Is Idexx (IDXX) Down 10.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Idexx Laboratories (IDXX). Shares have lost about 10.3% in that time frame, underperforming 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 Top Estimates , Revenues Grow Y/Y

IDEXX Laboratories, Inc.  posted fourth-quarter 2019 earnings per share  of $1.04, reflecting a 6.1% year-over-year rise. The figure surpassed the Zacks Consensus Estimate by 14.3%. Comparable-constant-currency  earnings growth was 17%, which excludes the impact of CEO transition charges of 14 cents per share.

For 2019, earnings came in at $4.89, up 14.8% (up 21% at comparable constant currency basis) from the year-ago tally. The figure surpassed the Zacks Consensus Estimate by 2.7%.

Revenues in Detail

Fourth-quarter revenues grew 10.2% year over year to $605.4 million. The metric also beat the Zacks Consensus Estimate by 0.9%. The year-over-year upside was primarily driven by strong global gains in Companion Animal Group (“CAG”) Diagnostics’ recurring revenues.

For 2019, revenues totaled $2.41 billion, up 9% on a reported basis and 10% on an organic basis. The figure surpassed the Zacks Consensus Estimate by 0.4%.

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 11% (up 11% organically) year over year to $529.8 million. The Water segment’s revenues were up 9% (up 10% organically) year over year to $32.87 million. LPD revenues rose 8% (up 10% organically) to $36.7 million. Revenues at the Other segment grew to $6.1 million.

Margins

Gross profit in the fourth quarter rose 10.3% to $331.1 million despite a 10.1% rise in cost of revenues to $274.3 million. Accordingly, gross margin expanded 2 basis points (bps) to 54.7%.

Sales and marketing expenses rose 10.2% to $105.7 million, while general and administrative expenses moved up 26.6% to $74.7 million. Additionally, research and development expenses rose 16.7% to $35.2 million. Operating margin in the quarter contracted 190 bps to 19.1%.

Financial Position

IDEXX exited fiscal 2019 with cash and cash equivalents of $90.3 million compared with $123.8 million at the end of 2018. Net cash provided by operating activities at the end of fiscal 2019 was $459.2 million compared with $400.1 million at the end of 2018.

2020 Outlook

IDEXX has raised its revenue guidance for 2020 to a band of $2.62-2.65 billion, indicating organic and reported revenue growth of 9-10.5%.  The Zacks Consensus Estimate for revenues of $2.64 billion falls within the company’s guided range.

Meanwhile, the  earnings projection has been raised by 12 cents to the band of $5.42 – $5.58, suggesting annualized growth of 13-16% at CER The Zacks Consensus Estimate for earnings stands at $5.42, within the company’s projected range.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Idexx has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, 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 trending upward for the stock, and the magnitude of this revision has been net zero. It comes with little surprise Idexx has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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