Animal Health Firm Idexx's Robust Business Model Bolsters Position Despite Slower Growth, Says Analyst

Tuesday, Idexx Laboratories Inc IDXX reported second-quarter adjusted EPS of $3.02, up 15% year-over-year, beating the consensus of $2.88.

The company reported sales of $1 billion, an increase of 6% as reported and 7% organically, almost in line with the consensus of $1.01 billion.

The revenue growth was driven by Companion Animal Group growth of 6% as reported and 7% organic and Water revenue growth of 9% as reported and 10% organic.

Related: Aging Pet Population Is ‘Solid Longer-Term Tailwind’ For Idexx Labs: Analyst.

Strong interest in Idexx solutions supported record second-quarter premium instrument placements and 11% annual growth in Idexx’s global premium instrument installed base.

The gross margin of 61.7% increased by 100 basis points as reported and 90 basis points on a comparable basis, supported by benefits from net price realization offsetting inflationary cost impacts, software service margin gains, and favorable business mix.

Operating margin was 26.3% for the quarter, lower than the prior year by 510 basis points, including ~610 basis point negative impact from $62 million of expense related to a discrete litigation expense accrual.

Guidance: Idexx Laboratories forecasts 2024 revenue of $3.885 billion-$3.945 billion versus prior guidance of $3.895 billion-$3.965 billion and consensus of $3.936 billion

The company expects adjusted 2024 EPS of $10.31- $10.59 compared to prior guidance of $10.82-$11.20 and consensus of $11.06, reflecting impacts from the 56 cents per share discrete litigation expense accrual and consistent expectations for solid comparable operating margin improvement.

William Blair writes, “In our view, the slower growth this quarter was driven by a decline in vet office visits, a trend that has persisted for several quarters now, despite easing year-over-year comparisons.”

The analyst adds,” Our initial thought is that even if trends do not materially improve, Idexx can likely hit the updated outlook range provided today, though to reach the middle and especially the high end of its outlook range.”

The analyst highlights that Idexx’s strong performance reaffirms the resilience of the global animal health market and the robustness of the company’s business model.

Price Action: IDXX stock is up 4.65% at $476.25 at last check Tuesday.

Read Next:

• Baxter Lifts Annual Outlook After Strong Q2 Beat, Medical Devices Sales

Image: Unsplash