Idexx (IDXX) Up 8% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Idexx Laboratories (IDXX). Shares have added about 8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Idexx due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

IDEXX Beats Q2 Earnings Estimates

IDEXX Laboratories, Inc.  posted second-quarter 2019 earnings per share (EPS) of $1.43, reflecting a 16.3% year-over-year rise on a reported basis and 19% growth at comparable constant exchange rate (CER). The figure also surpassed the Zacks Consensus Estimate by 4.4%.

Revenues in Detail

Second-quarter revenues increased 6.8% year over year (up 9% on an organic basis) to $620.1 million. The metric however missed the Zacks Consensus Estimate by 1.3%.

The year-over-year upside was primarily driven by strong global gains from Companion Animal Group (CAG) Diagnostics’ recurring revenues.

Segmental Analysis

IDEXX derives revenues from four operating segments: CAG, Water, Livestock, Poultry and Dairy (LPD) and Other. In the second quarter, CAG revenues climbed 8% (up 10% organically) year over year to $547.3 million. Water segment’s revenues were up 6% from the prior-year quarter (up 10% organically) to $30.3 million. LPD revenues dropped 5% (flat organically) to $31.5 million. Revenues at the Other segment also slipped 12.5% on a reported basis to $4.9 million.

Margins

Gross profit in the second quarter rose 7.6% to $357.9 million in spite of a 5.6% rise in cost of revenues to $262.3 million. Accordingly, gross margin expanded 47 basis points (bps) to 57.7%.

Sales and marketing expenses rose 5.3% to $101.3 million while general and administrative expenses slid 1.8% to $59.9 million. Additionally, research and development expenses increased 9.3% to $32.3 million. Operating margin in the quarter expanded 142 bps to 26.5%.

Financial Position

IDEXX exited the second quarter of 2019 with cash and cash equivalents of $ 110.8 million compared with $116.6 million at the end of the first quarter of 2019. Year-to-date net cash provided by operating activities was $171.5 million compared with $153.7 million in the year-ago period.

2019 Outlook Updated

IDEXX slightly narrowed its revenue guidance for 2019. Full-year revenues are now estimated in the range of $2.38-$2.41 billion, (from the past projection of $2.38-2.42 billion), indicating organic revenue growth of 9.5-10.5% (reported revenue growth of 7.5-9%).

Meanwhile, EPS projection has been raised to the $4.82-4.92 (from the past projection of $4.76-$4.88) band, suggesting annualized growth of 17-20% at CER. The current Zacks Consensus Estimate for EPS stands at $4.82 on revenues of $2.41 billion.

How Have Estimates Been Moving Since Then?

Estimates revision followed a downward path over the past two months.

VGM Scores

At this time, 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

Idexx has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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