Aging Pet Population Is 'Solid Longer-Term Tailwind' For IDEXX Labs: Analyst

Wednesday, IDEXX Laboratories Inc IDXX reported first-quarter adjusted EPS of $2.81, up 10% Y/Y, beating the consensus of $2.67.

The company reported sales of $964 million, an increase of 7% as reported and organic, missing the consensus of $966.13 million.

The revenue growth was driven by Companion Animal Group (CAG) growth of 7% as reported and organic, and Water revenue growth of 11% as reported and organic.

IDEXX revenue gains were net of an estimated 0.5% – 1% negative growth rate impact from severe U.S. weather in January.

The gross margin of 61.5% increased by 120 basis points as reported and ~110 basis points on a comparable basis, supported by benefits from the business mix, lower instrument costs, and improvement in gross margins of software service.

Operating margin was 31.0% for the quarter, 10 basis points lower than the prior year’s.

Guidance: IDEXX Laboratories forecasts 2024 revenue of $3.895 billion—$3.965 billion, versus prior guidance of $3.93 billion—$4.04 billion and a consensus of $3.99 billion.

The company expects 2024 CAG Diagnostics Recurring Revenue Growth of 6.5%-8.5% versus prior guidance of 7.5%-10.5%, with organic growth of 7.5%-9.5% compared to prior guidance of 7.5%-10.5%.

The company forecasts 2024 EPS of $10.82-$11.20 versus prior guidance of $10.84-$11.33 and a consensus of $11.12.

William Blair writes that this quarter’s slower growth was driven by a decline in vet visits and an inclement weather impact in January. Most of these headwinds were expected by investors and already incorporated into guidance. 

The analyst writes that Idexx’s still-solid results demonstrate the durability of the global animal health market and, more specifically, the durability of the company’s business franchise.

Although current market volume declines are a challenge for short-term growth, William Blair is optimistic about the future due to the increasing number of pet owners from the pandemic-driven surge in puppy adoption.

“Starting as early as this year and continuing through 2030, we believe an aging pet population will start to require an increasing level of veterinary care (especially diagnostics), and thus presents a solid longer-term tailwind for the industry.”

William Blair adds, “Paired with another year of solid pricing growth and the launch of a novel instrument platform (InVue Dx) in later 2024, we also believe the 2025 outlook remains solid.”

Price Action: IDXX shares are down 3.11% at $477.43 at the last check Wednesday. 

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