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IDEXX (IDXX) CAG Placement Grows Globally, LPD Disappoints

IDEXX' (IDXX) global Reference Lab businesses are robust driven by high same-store volume growth with strong gains across testing categories.

This story originally appeared on Zacks

IDEXX Laboratories, Inc.'s IDXX robust worldwide commercial capabilities and best-in-class products, including its next-generation chemistry analyzer, Catalyst One, are the key near-term growth drivers. The stock carries a Zacks Rank #3 (Hold) at present.

- Zacks

Over the past six months, IDEXX has been outperforming its industry with respect to share price movement. The stock has gained 21.4% compared with the 19.3% rise of the industry.

IDEXX exited the third quarter of 2021 with better-than-expected results. Solid organic revenue growth is encouraging. The top line in the quarter was driven by strong sales at the Companion Animal Group (CAG) and Water businesses. Third-quarter results reflected 11.5% organic growth in CAG diagnostic recurring revenues, with double-digit gains across the U.S. and international markets. The two-year average annual organic growth rate for CAG diagnostic recurring revenues was maintained at 16%, reflecting mid-to-high teens average gains across major modalities.

IDEXX continues to demonstrate solid growth globally. International revenues in the third quarter of 2021 were up 8.2% organically, primarily aided by a double-digit gain in CAG and Water businesses.

CAG Diagnostic recurring revenues in the reported quarter reflected 14% growth in international regions. On a two-year basis, the average annual CAG Diagnostic recurring revenue growth was 16% overall, reflecting 16% gains in both the U.S. and international regions. Further, Global Reference Lab gains were strong driven by high same-store volume growth with strong gains across testing categories. IDEXX VetLab consumable revenues increased 14% organically in the third quarter, reflecting double-digit gains in the United States and continued high-growth in international regions. In terms of CAG instrument placements, the quarter reflected strong gains across the U.S. and international regions. The company registered strong global placement gains across core platforms with Catalyst up 22%, premium hematology up 62%, and SediVue, up 30%.

Water revenues increased 13% organically, supported by solid gains across compliance and non-compliance testing categories.

Its expanded operating margin and a raised full-year earnings guidance were the other upsides.

On the flip side, in the third quarter, IDEXX’s Livestock, Poultry and Dairy (LPD) revenues declined 23% organically, constrained by comparisons to high prior-year levels, additional impacts in China, changes in local ASF disease management approaches, lower pork prices, and changes in government requirements related to livestock infectious disease testing programs.

Further, the contraction of gross margin and escalating operating costs are concerns. Gross margin contracted 19 bps to 58.4% on a 12.8% rise in the cost of revenues. Further, sales and marketing expenses rose 15% while research and development expenses climbed 7.8% in the third quarter.

Key Picks

A few better-ranked stocks from the broader medical space are BioRad Laboratories BIO, Chemed CHE, and Thermo Fisher Scientific TMO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

BioRad has a historical long-term earnings growth rate of 23.6%.

Chemed has a long-term historical earnings growth rate of 22.2%.

Thermo Fisher has a long-term historical earnings growth rate of 20.7%.

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