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What's in Store for IDEXX Laboratories (IDXX) in Q3 Earnings?

Zacks Equity Research
·5-min read

IDEXX Laboratories, Inc. IDXX is slated to report third-quarter 2020 results on Oct 29, before market open. In the last-reported quarter, the company’s earnings per share (EPS) of $1.72 surpassed the Zacks Consensus Estimate by 43.3%. Moreover, earnings surpassed the consensus estimate in the trailing four quarters, the average beat being 18.06%.

Let's take a look at how things have shaped up prior to this announcement.

Factors at Play

IDEXX is expected to have sustained its strong earnings trajectory in Companion Animal Group (“CAG”) Diagnostic revenues in the third quarter on high CAG diagnostic recurring revenues and continued high customer retention. The segment is also likely to have maintained strength in recurring service revenues as well as sustained strong growth in Neo, Web PACS and SmartFlow cloud-based software offerings.

Through the past few quarters, the company has been witnessing solid organic revenues in the CAG segment on strong contributions from its VetLab consumable and Reference Lab. Notably, despite a dismal performance of the Rapid Assay products during the second quarter, the company confirmed strong rebound on pent-up demand for wellness testing. These trends are likely to have continued through the third quarter as well, driving the top line.

IDEXX Laboratories, Inc. Price and EPS Surprise

 

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

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

The company, over the past few months, have continued with the installation of its Sedivue Dx, a trend which is likely to have continued through the third quarter. IDEXX has already achieved 545 premium hematology placements in 275 SediVue placements, raising the global SediVue install base to more than 9,500 instruments. These developments are likely to have driven the third-quarter top line.

Despite the pandemic-led business challenges, IDEXX’s Water business is likely to have maintained strength as drinking water testing remains an essential service and priority for local governments and utilities. This is expected to get reflected in third-quarter results. Further, following a dismal second quarter, the company registered improvement in water revenue trends. This is also likely to have continued through the third quarter.

The company’s SARS-CoV-2 (COVID-19) RealPCR (Real polymerase chain reaction) Test for pets, launched in April, is likely to have maintained momentum during the third quarter as well. Per the company's earlier announcement, the test is available to veterinarians in North America. Further, the company was supposed to roll out the test in other countries within a few weeks of the announcement. This is likely to have contributed to IDEXX’s top line.

IDEXX is likely to have continued to benefit from its OPTI SARS-CoV-2 reverse transcription PCR (RT-PCR) test during the third quarter. The company, during its second-quarter earnings call in July, confirmed to have completed work to adapt the OPTI PCR test for use in wastewater samples to offer it to IDEXX’s water customers through its water commercial organization. This is likely to have boosted third-quarter revenues.

IDEXX’s Livestock, Poultry and Dairy (“LPD”) segment is likely to have continued to benefit from demand for diagnostic testing programs for African swine fever, an improvement in core swine testing volumes in China supported by large producer efforts to rebuild swine herds. Further, the company has registered continued solid growth for poultry testing globally. These are expected to have continued during the third quarter as well, thus driving the top line.

Over the past six months, this S&P 500 stock has rallied 55.9% compared with the industry’s 26.4% growth and the S&P 500's 21.9% rise despite the challenges posed by the pandemic.

Q3 Estimates

The Zacks Consensus Estimate for third-quarter 2020 revenues is pegged at $670.7 million, indicating a 10.8% rise from the prior-year quarter’s reported figure.

The same for earnings is pegged at $1.42, suggesting a 14.5% improvement from the figure reported in the year-ago quarter.

What Our Model Suggests

Our proven model predicts an earnings beat for IDEXX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: IDEXX has an Earnings ESP of +0.35%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering, as these too have the right combination of elements to beat on earnings this reporting cycle.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.70% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

LHC Group, Inc. LHCG has an Earnings ESP of +1.85% and is a Zacks #2 Ranked stock.

Quidel Corporation QDEL has an Earnings ESP of +8.14% and it flaunts a Zacks Rank of 1 at present.

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