Yahoo Finance Rising Margins Allow IDEXX Laboratories to Boost Guidance
IDEXX Laboratories (NASDAQ: IDXX), a diversified pet healthcare company, reported its first-quarter result on Wednesday.
The reported revenue growth came in at 7%, which represents a continued deceleration from what it has been able to post in recent quarters. Thankfully, management is keeping a close watch on the company's spending and was able to translate the single-digit gain into double-digit growth where it counts.
IDEXX Laboratories quarterly results: The raw numbers
Metric | Q1 2019 | Q1 2018 | Year-Over-Year Change |
|---|---|---|---|
Revenue | $576 million | $538 million | 7% |
Net Income | $103 million | $90 million | 14% |
Earnings per share | $1.17 | $1.01 | 16% |
Data source: IDEXX Laboratories.
What happened with IDEXX Laboratories this quarter?
On an organic basis, revenue growth was 10%.
Companion Animal Group (CAG) revenue grew 8%. Recurring revenue from this division jumped 9%.
2,775 instruments were placed during the period, growing the install base 20%. Much of the growth is driven by strong demand for the company's Catalyst chemistry analyzer product.
IDEXX's water division revenue grew 4% on a reported basis and 8% on an organic basis.
Livestock division revenue dropped 2% on a reported basis, but it grew 4% on an organic basis.
Gross margin expanded 120 basis points to 57.6%. Management credited the gains to sales mix and sales leverage.
Operating margin jumped 210 basis points to 23.1%. The big jump was partially attributable to delayed spending on certain items.
On a currency-neutral basis, EPS growth would have come in at 27%.
Image source: Getty Images.
What management had to say
IDEXX's CEO, Jonathan Ayers, was pleased with how the first quarter shook out:
"Our strong business performance continued in the first quarter, sustaining high organic growth in CAG Diagnostics recurring revenues. With great runway ahead and a robust start to the year, we are well positioned to execute our unique innovation-based and multimodality strategy, enabled by our expanded global commercial capability, as we continue to deliver outstanding financial results aligned with our long-term goals."
Looking forward
Management reaffirmed its call for organic revenue growth of 9.5% to 11% for the full year. That translates into a revenue range of $2.385 billion to $2.425 billion. However, management was quick to point out that if exchange rates remain where they are today, then its revenue growth rate would be negatively impacted by about 1.5%.
Bottom-line guidance was favorably tweaked. The company expects its margin profile to remain strong, so earnings per share guidance for the full year was raised by a dime to a new range of $4.76 to $4.88. This range represents growth of 12% to 15% on a reported basis and includes currency headwinds of about $0.03 per share.
Management continues to project that its free cash flow will only be about 60% to 65% of net income because the company is spending heavily to expand its headquarters in Maine and relocating a laboratory in Germany.
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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Idexx Laboratories. The Motley Fool has a disclosure policy.
