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IDEXX (IDXX) Q3 Earnings Beat Estimates, 2022 EPS View Down

IDEXX Laboratories, Inc. IDXX posted third-quarter 2022 earnings per share (EPS) of $2.15, which reflected 6% year-over-year growth. The figure surpassed the Zacks Consensus Estimate by 5.4%.

Comparable constant-currency EPS of $2.23 for the third quarter of 2022 reflected year-over-year growth of 13%.

Revenues in Detail

Third-quarter revenues grew 4% year over year to $841.7 million. Organically, growth was 8%. The metric exceeded the Zacks Consensus Estimate by 1.5%.

The year-over-year upside was primarily driven by 4% reported and 8% organic growth in CAG Diagnostics recurring revenues. U.S. CAG Diagnostics recurring revenues grew 10% on a reported as well as organic basis. Continued high companion animal sector demand and benefits from IDEXX innovation and commercial engagement drove record global premium instrument placements.

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise

IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise
IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise

IDEXX Laboratories, Inc. price-consensus-eps-surprise-chart | IDEXX Laboratories, Inc. Quote

Veterinary software, services and diagnostic imaging systems revenues increased 14% as reported and 15% organically. Overall revenue growth was also supported by record quarterly placements of software solutions and a continued shift to cloud-based products.

Segmental Analysis

IDEXX derives revenues from four operating segments — CAG, Water, Livestock, Poultry and Dairy (LPD), and Other.

In the third quarter, CAG revenues rose 4% on a reported basis (up 8% organically) year over year to $764.9 million. The Water segment’s revenues also grew 7% (up 12% organically) year over year to $40.8 million. However, LPD revenues dropped 2% (down 12% organically) to $28.5 million. Revenues in the Other segment fell 30.8% on a reported basis to $7.4 million.

Margins

Gross profit in the third quarter rose 7.1% to $506.6 million. Gross margin expanded 184 basis points (bps) to 60.2%.

Sales and marketing expenses rose 4.5% to $130 million, while general and administrative expenses were up 2% to $83.8 million.  Research and development expenses climbed 18.8% to $48 million.

Overall, operating profit in the reported quarter was $244.8 million, reflecting an 8.3% rise year over year. The operating margin in the quarter expanded 121 bps to 29.1%.

Financial Position

IDEXX exited the third quarter of 2022 with cash and cash equivalents of $99.2 million compared with $114.4 million recorded at the end of the second quarter of 2022. Total debt (including the current portion) at the end of the third quarter of 2022 was $760.8 million compared with a total debt of $767.9 million at the end of Q2.

Cumulative net cash provided by operating activities at the end of the third quarter of 2022 was $369.6 million compared with $545.6 million a year ago.

2022 Guidance

The company updated its full-year 2022 outlook.

For 2022, the company now expects revenue growth in the range of $3,325-$3,365 million (earlier projection was $3,305-$3,385 million), indicating growth of 3.5-4.5% (3-5.5%) on a reported basis and organic growth of 6.5-7.5% (5.5-8.5%). The Zacks Consensus Estimate for the same is currently pegged at $3.35 billion.

Further, IDEXX’s full-year EPS guidance is now pegged in the range of $7.74-$7.98 ($7.77-$8.05), indicating a decline of 7-10% (6-10%) on a reported basis. The Zacks Consensus Estimate for full-year EPS is currently pegged at $7.88.

Our Take

IDEXX exited the third quarter of 2022 on a decent note, with earnings and revenues both beating estimates. The company registered year-over-year growth in revenues on both reported and organic basis. The top line was driven by strong CAG Diagnostics recurring revenue growth. Growth was supported by record instrument placements, resulting in a year-over-year expansion of IDEXX's global premium instrument installed base, which is encouraging.

On the flip side, LPD revenues declined in the quarter on a reported basis. Further, inflationary pressure has been weighing on the bottom line. The reduced EPS guidance for 2022 and narrowed organic revenue growth range reflect the ongoing severe foreign exchange headwind.

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 Elevance Health Inc. ELV, Medpace Holdings, Inc. MEDP and Merit Medical Systems, Inc. MMSI.

Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.

Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.

Medpace Holdings has an estimated growth rate of 44.9% for full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.

Merit Medical, flaunting a Zacks Rank #1, reported third-quarter 2022 adjusted EPS of 64 cents, which beat the Zacks Consensus Estimate by 20.8%. Revenues of $287.2 million outpaced the consensus mark by 5.2%.

Merit Medical has an estimated long-term growth rate of 10.5%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average being 25.4%.


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