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IDEXX (IDXX) Witnesses Rising Expenses, Currency Issues

IDEXX Laboratories' IDXX business has been suffering due to complex macroeconomic conditions and unfavorable currency movement. The stock carries a Zacks Rank #4 (Sell) currently.

Global macroeconomic conditions, including growing geopolitical complexities, supply chain disruptions leading to increases in the unit cost of raw materials, shortages of healthcare staff, fluctuations in foreign currency exchange rates and volatility in capital markets may continue to affect IDEXX’s results of operations. These challenges, along with geopolitical instability, including the current war in Ukraine, have affected IDEXX’s supply chain operations globally. With sustained inflationary pressure in the future, the company may struggle to keep in check its cost of revenues and operating expenses.

During the first quarter of 2024, IDEXX saw a significant 31.3% uptick in general and administrative expenses. Further, U.S. clinical visit growth levels in the first quarter were relatively softer than anticipated, which is likely due to the ongoing staffing challenges at veterinary clinics and broader cumulative macroeconomic pressure on U.S. consumers.

Further, the majority of IDEXX's consolidated revenues are from product sales in international markets, with approximately 21% of total revenues in 2023 derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies.  Thus, the strengthening of the rate of exchange for the U.S. dollar relative to other currencies had a negative impact on the company’s revenues derived in currencies other than the U.S. dollar and on profits from products manufactured in the United States and sold internationally. In 2023, foreign exchange reduced operating profits by $25 million (operating margin gains by 60 basis points) and EPS by 24 cents per share.

During the first quarter of 2024, it had a limited impact on gross margin, operating profit and EPS. IDEXX’s updated 2024 revenue forecast includes a $35 million impact, equivalent to about a 1% decrease, due to the recent appreciation of the U.S. dollar.

IDEXX Laboratories, Inc. Price

IDEXX Laboratories, Inc. Price
IDEXX Laboratories, Inc. Price

IDEXX Laboratories, Inc. price | IDEXX Laboratories, Inc. Quote

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However, IDEXX is focused on growing its global commercial capability to sustain strong CAG Diagnostics recurring revenue growth. In late 2023, the company expanded its operations in the United States for the first time in four years, complementing the seven international expansions it has advanced since 2021. Through these strategic investments, the company continues to strengthen its growth prospects by delivering high-touch commercial engagement in the fastest-growing regions while maintaining strong business performance. This expanded global commercial capability is yielding strong results overseas, with notable 12% organic growth in international CAG diagnostic recurring revenues in the first quarter of 2024.

Diagnostics has been one of the fastest-growing areas of the veterinary clinic for IDEXX since the determination of a patient's health status and the best treatment path often requires testing. IDEXX largely provides advanced diagnostic capabilities that meet veterinarians’ diverse needs through a variety of modalities, including in-clinic diagnostic solutions and outside reference laboratory services. These diagnostic capabilities generate a mix of recurring and non-recurring revenues.

Key Picks

Some better-ranked stocks in the broader medical space are Hims & Hers Health HIMS, High Tide HITI and Medpace MEDP. Each of them sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks Rank #1 stocks here.

Hims & Hers Heath stock has rallied 53.3% in the past year. Earnings estimates for the company have risen from 10 cents to 18 cents in 2024 and from 23 cents to 32 cents in 2025 in the past 30 days.

HIMS’ earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. In the last reported quarter, it posted an earnings surprise of a staggering 150%.

Estimates for High Tide’s 2024 earnings per share have remained unchanged in the past 30 days. Shares of the company have surged 57.9% upward in the past year against the industry’s fall of 0.6%.

HITI’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 91.7%. In the last reported quarter, it delivered an earnings surprise of 100%.

Estimates for Medpace’s 2024 earnings per share have moved up to $11.29 from $10.53 in the past 30 days. Shares of the company have risen 87.6% in the past year compared with the industry’s 5% growth.

MEDP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.

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IDEXX Laboratories, Inc. (IDXX) : Free Stock Analysis Report

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