Why Is Idexx (IDXX) Up 2.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Idexx Laboratories (IDXX). Shares have added about 2.6% 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 catalysts.
IDEXX Earnings Beat Estimates in Q4, Margins Rise
IDEXX posted fourth-quarter 2020 earnings per share of $2.01, reflecting a 93.3% year-over-year rise. The figure surpassed the Zacks Consensus Estimate by 40.6%.
Comparable-constant-currency earnings per share growth was 43.4%, which excludes an impact of 25 cents per share from the enactment of tax reform in Switzerland and tax benefits from share-based compensation of 13 cents per share.
Full-year adjusted earnings per share was $6.71, reflecting a 37.2% increase from the year-ago period. Again, the metric surpassed the Zacks Consensus Estimate by 9.5%.
Revenues in Detail
Fourth-quarter revenues grew 19.1% year over year to $720.9 million. Organically, growth was 17.2%. The metric exceeded the Zacks Consensus Estimate by 5.8%.
The year-over-year upside was primarily driven by 23% reported and 21% organic growth in global CAG Diagnostics’ recurring revenue. Sustained strong growth in the LPD business also drove the top line. OPTI Medical Systems’ COVID-19 human PCR testing contributed about 1.5% to the fourth-quarter top line.
However, fourth-quarter results were impacted by a fall in new CAG instrument placement levels and Water business revenues, including pressure on non-compliance water testing, impacted by factors related to the COVID-19 pandemic.
Full-year revenues were $2.71 billion, reflecting a 12.5% increase from the year-ago period. Organically, growth was 12%. Revenues surpassed the Zacks Consensus Estimate by 1.5%.
Segmental Analysis
IDEXX derives revenues from four operating segments — CAG, Water, LPD and Other.
In the fourth quarter, CAG revenues rose 18.9% (up 17% organically) year over year to $629.7 million. The Water segment’s revenues were up 0.7% (up 0.4% organically) year over year to $33.1 million. LPD revenues rose 15.9% (up 12.7% organically) to $42.5 million. Revenues at the Other segment grew 156.2% on reported and organic basis to $15.7 million.
Margins
Gross profit in the fourth quarter rose 23.7% to $409.5 million. Gross margin expanded 211 basis points (bps) to 56.8% despite a 13.5% rise in cost of revenues to $311.4 million.
Sales and marketing expenses rose 9.7% to $115.9 million, while general and administrative expenses moved down 6.6% to $69.7 million. Research and development expenses climbed 10.3% to $38.8 million.
Operating profit in the reported quarter was $185.1 million, reflecting an improvement of 60.1% year over year. Operating margin in the quarter expanded 658 bps to 25.7%.
Financial Position
IDEXX exited 2020 with cash and cash equivalents of $383.9 million compared with $90.3 million recorded at the end of 2019. Total debt (including current portion) for the company at the end of 2020 was $908.5 million compared with total debt of $698.9 million at the end of 2019.
Cumulative net cash provided by operating activities at the end of the year was $648.1 million compared with $459.2 million a year ago.
2021 Outlook
IDEXX, boosted by the ongoing business recovery and strong performances in the reported quarter, has provided the initial financial outlook for 2021.
The company projects the revenues for the year to be in the range of $3.07-$3.12 billion, reflecting growth of 13-15.5% on a reported basis. Organic growth is expected in the range of 11.5-13.5%. The Zacks Consensus Estimate for the same is currently pegged at $2.98 billion.
The CAG Diagnostics recurring revenues for 2021 are expected to reflect a growth of 13.5-16% on a reported basis and 12-14.5% on an organic basis.
Further, IDEXX projects full-year earnings per share to be in the range of $7.39-$7.71, reflecting growth of 10-14% on a reported basis. The comparable constant currency growth is expected in the range of 15-20%. The Zacks Consensus Estimate for the same is currently pegged at $6.91.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 10.22% due to these changes.
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 F on the value side, putting it in the fifth quintile 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
Estimates have been trending upward for the stock, and the magnitude of these revisions 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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