Why Is Idexx (IDXX) Up 3% Since Last Earnings Report?

A month has gone by since the last earnings report for Idexx Laboratories (IDXX). Shares have added about 3% 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 its most recent earnings report in order to get a better handle on the important drivers.

IDEXX Rides on Solid CAG Diagnostics Business in Q1

IDEXX Laboratories posted first-quarter 2019 earnings per share (EPS) of $1.17, reflecting a 15.8% year-over-year rise on a reported basis and 27% growth at comparable constant exchange rate (CER). The figure also surpassed the Zacks Consensus Estimate by 12.5%.

Revenues in Detail

First-quarter revenues increased 7.1% year over year (up 10% on an organic basis) to $576.1 million. The metric exceeded the Zacks Consensus Estimate by 0.8%.

This upside was primarily driven by strong global gains from Companion Animal Group (CAG) Diagnostics’ recurring revenues along with the expansion of global premium instrument installed base.

Segmental Analysis

IDEXX derives revenues from four operating segments: CAG, Water, Livestock, Poultry and Dairy (LPD) plus Other.In the first quarter, CAG revenues climbed 9% (up 12% organically) year over year to $508.9 million. Water segment’s revenues were up 4% from the prior-year quarter (up 8% organically) to $30.3 million. LPD revenues dipped 2% (up 4% organically) to $31.5 million. Revenues at the Other segment also slipped 2.2% on a reported basis to $5.3 million.

Margins

Gross profit in the first quarter ascended 9.4% to $331.6 million in spite of a 4.2% rise in cost of revenues to $244.5 million. Accordingly, gross margin expanded 119 basis points (bps) to 57.6%.

Sales and marketing expenses rose 6.4% to $106.6 million while general and administrative expenses slid 0.9% to $60.4 million. Additionally, research and development expenses increased 8.6% to $31.5 million. Operating margin in the quarter improved 209 bps to 23.1%.

Financial Position

IDEXX exited the first quarter of 2019 with cash and cash equivalents of $116.6 million compared with $123.8 million at the end of 2018. At the end of the first quarter, net cash provided by operating activities was $34.4 million compared with $34.9 million in the year-ago period.

2019 Outlook Updated

IDEXX reaffirmed its revenue guidance for 2019. Full-year revenues are reiterated in the range of $2,385-$2,425 million, indicating organic revenue growth of 9.5-11% (reported revenue growth of 8-9.5%).

Meanwhile, EPS projection has been raised to the $4.76-$4.88 (from the past projection of $4.66-$4.78) band, suggesting annualized growth of 16-19% at CER. The current Zacks Consensus Estimate for EPS stands at $4.69 on revenues of $2.41 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Idexx has an average Growth Score of C, however its Momentum Score is doing a bit better 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Idexx has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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