Yahoo Finance Here's Why You Should Invest in IDEXX (IDXX) Stock Right Now
IDEXX Laboratories, Inc. IDXX has been gaining from strong global growth. The ongoing strength in the company’s Companion Animal Group (CAG) business buoys optimism. However, foreign exchange headwinds and escalating expenses do not bode well.
In the past year, shares of this Zacks Rank #2 (Buy) company lost 12.5% compared with the industry’s 14.7% fall. The S&P 500 fell 9.2% during the same period.
The renowned medical device company has a market capitalization of $38.81 billion. Over the past five years, the company has registered earnings growth of 18.9%, ahead of the industry’s 5.2% rise. The long-term expected growth rate is estimated at 18%, compared with the industry’s growth expectation of 16.4%.
Let’s delve deeper.
Q4 Upsides: IDEXX exited the fourth quarter of 2022 on a decent note, with earnings and revenues beating estimates. The company registered year-over-year growth in revenues on a reported and organic basis. The top line was driven by continued benefits from the expansion of IDEXX's global premium instrument installed base. CAG Diagnostics’ organic recurring revenue growth reflects solid gains across IDEXX's major modalities globally, supported by growth in clinical service demand and expanded utilization of diagnostic products and services.
Strong Global Performance: IDEXX continues to demonstrate solid growth globally. International revenues are primarily aided by a gain in CAG and Water businesses. CAG premium instrument placements increased 13% in the fourth quarter, reflecting double-digit gains across the catalyst, premium hematology and SediVue platforms. The company placed 5,065 premium instruments in Q4. The quality of placements continues to be excellent, as reflected in the 3% global gains in new and competitive Catalyst placements, including 7% gains in the U.S. The company also witnessed a 5% growth in new and competitive premium hematology placements globally, leveraging strong customer interest in ProCyte One.
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CAG Continues to Perform Well: IDEXX derives the lion’s share of its revenues from the CAG segment. The company registered stellar third-quarter revenue growth within CAG.
In the fourth quarter, DEXX's U.S. CAG Diagnostic’s recurring revenue increased by 9%, outpacing sector growth trends. IDEXX' U.S. performance was supported by a 1,200 basis point growth benefit from IDEXX execution drivers, including approximately 7% net price gains and continued solid growth contributions from customer additions and the leverage of IDEXX innovation.
Downsides
Foreign Exchange Headwind: The majority of IDEXX’s consolidated revenues are derived from the sale of products in international markets. 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 U.S. and sold internationally.
Weak Solvency and Capital Structure: IDEXX exited 2022 with cash and cash equivalents of $112.5 million compared with $144.5 million recorded at the end of 2021. Total debt (including the current portion) at the end of 2022 was $769.4 million compared with a total debt of $850.2 million at the end of 2021. However, if we consider the current debt at the end of the quarter, it was less than the quarter-end cash balance.
At the end of the fourth quarter, total debt-to-capital of 55.8% stands at a high level right now. This ratio was down from 61.5% in the third quarter. The times interest earned by the company stands at 22.6%, representing a decline from 25.8% at the end of third-quarter 2022.
Estimate Trends
IDEXX has been witnessing an upward estimate revision trend for 2023. For the past 90 days, the Zacks Consensus Estimate for IDEXX’s 2022 earnings has moved 1.3% north to $9.52.
The Zacks Consensus Estimate for 2023 revenues is pegged at $3.63 billion, suggesting 7.8% growth from the year-ago quarter’s reported number.
Key Picks
Few other top-ranked stocks in the overall healthcare sector include Haemonetics Corporation HAE, TerrAscend Corp. TRSSF and Akerna Corp. KERN. Haemonetics and TerrAscend both sport a Zacks Rank #1 (Strong Buy) and Akerna carries a Zack Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has risen 42.1% in the past year. Earnings Estimates for Haemonetics have increased from $2.87 per share to 2.91 for 2023 and from $3.02 per share to $3.28 for 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the last four quarters, delivering an average surprise of 10.98%. In the last reported quarter, it reported an earnings surprise of 7.59%.
Estimates for TerrAscend in 2023 have remained constant at a loss of 10 cents per share in the past 30 days. Shares of TerrAscend have declined 70.6% in the past year.
TerrAscend’s earnings beat estimates in one of the last three quarters and missed the mark in the other two, with the average negative surprise being 136.11%. In the last reported quarter, TRSSF delivered an earnings surprise of 216.67%.
Akerna’s stock declined by 95.7% in the past year. Its estimates for 2023 have remained constant at a loss of $1.91 per share over the past 30 days.
Akerna missed earnings estimates in each of the last four quarters, delivering a negative earnings surprise of 15.49% on average. In the last reported quarter, KERN delivered a negative earnings surprise of 13.33%.
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