IDEXX Laboratories, Inc. IDXX reported second-quarter 2018 earnings per share (EPS) of $1.23, up 29.5% year over year on a reported basis and up 33% on a comparable constant exchange rate (CER) basis. This also surpassed the Zacks Consensus Estimate by 4.2%.
Revenues in Detail
Revenues rose 14.1% year over year (up 12% on organic basis) to $580.8 million, surpassing the Zacks Consensus Estimate of $574.9 million.
The upside was driven by strong global gains in Companion Animal Group (“CAG”) Diagnostics recurring revenues, including double-digit organic revenue gains in in IDEXX VetLabacross consumable and reference laboratorydiagnostic and consulting services. Further, steady overall growth contributed to the top line.
Segmental Analysis
IDEXX derives revenues from four operating segments: CAG; Water; Livestock, Poultry and Dairy (LPD); and Other.
IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise
IDEXX Laboratories, Inc. Price, Consensus and EPS Surprise | IDEXX Laboratories, Inc. Quote
In the second quarter, CAG revenues rose 15.3% (up 13% organically) year over year to $507.4 million. Water segment’s revenues were up 11.2% from the prior-year quarter (up 9% organically) to $32.6 million. LPD revenues grew 3.9% (flat organically) to $34.9 million. Revenues at the Other segment rose 6.7% on a reported basis to $5.6 million.
Margins
Gross profit increased 13.6% to $332.4 million in the reported quarter. However, gross margin contracted 27 basis points (bps) to 57.2% on a 14.8% rise in cost of revenues to $248.3 million.
Sales and marketing expenses rose 9.8% to $96.3 million, while general and administrative expenses increased 10.1% to $61.1 million. Research and development expenses rose 9.3% to $29.5 million. Operating margin in the quarter improved 99 bps to 25.1%.
Financial Position
IDEXX exited the second quarter of 2018 with cash and cash equivalents of $174.6 million, compared with $159.2 million at the end of the first quarter. Year-to-date net cash provided by operating activities was $153.7 million, compared with $141.5 million in the year-ago period.
2018 Guidance
IDEXX has lowered the upper end of its 2018 revenue outlook to a new range of $2,205-$2,230 million (earlier range was $2,205-$2,245 million). However, the company has raised the lower end of its 2018 revenue organic growth guidance to 11.5-12.5% from the previous 10.5-12.5%. The Zacks Consensus Estimate for 2018 revenues is pegged at $2.23 billion, within the guided range.
Management also raised the low end of its EPS guidance to $4.10-$4.20 from the earlier $4.06-$4.20, supported by continued operating margin expansion aligned with its long-term goals. The updated outlook represents EPS growth of 39-43% on a reported basis compared with 38-43% stated previously. The Zacks Consensus Estimate for 2018 adjusted EPS is pegged at $4.17, within the guided range.
Our Take
IDEXX exited the second quarter on a solid note. Moreover, solid year-over year growth in organic revenues and a raised EPS guidance for 2018 are encouraging.
The stellar performance was driven by strong sales at the CAG business. The companion animal market fundamentals remain solid with tremendous global runway for growth. Management’s innovation-based, multi-modality global strategy, enabled by enhanced commercial capability, accelerated recurring CAG Diagnostics revenue growth.
Zacks Rank & Other Key Picks
IDEXX has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical sector having reported solid results this earnings season so far are Intuitive Surgical ISRG, Chemed Corp. CHE and Align Technology, Inc. ALGN. While Intuitive Surgical sports a Zacks Rank of 1, Chemed and Align Technology carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical reported second-quarter 2018 adjusted EPS of $2.76, which beat the Zacks Consensus Estimate of $2.48. Revenues totaled $909.3 million, also surpassing the consensus estimate of $870 million.
Chemed reported second-quarter 2018 adjusted EPS of $2.81, which trumped the Zacks Consensus Estimate of $2.68. Revenues of $441.8 million edged past the Zacks Consensus Estimate of $432.3 million.
Align Technology posted second-quarter 2018 adjusted EPS of $1.30, steering past the Zacks Consensus Estimate of $1.09. Revenues came in at $490.3 million, beating the consensus estimate of $462.9 million.
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