IDEXX (IDXX) Profits above Q3 estimate, lower gross margin – November 2, 2021

IDEXX Laboratories, Inc. (IDXX Free Report) posted earnings per share (EPS) of $ 2.03 in the third quarter of 2021, reflecting a 20.1% year-over-year increase. The figure topped Zacks’ consensus estimate by 7.9%.

Comparable EPS at constant exchange rates of $ 1.96 in the third quarter of 2021 reflects 12% year-over-year growth.

Income in detail

Third quarter revenue increased 12.3% year-over-year to $ 810.4 million. On an organic basis, growth was 10%. The metric topped Zacks’ consensus estimate by 2.2%.

Year-over-year increase is primarily driven by 13% reported and 11% organic growth in global recurring revenue from Companion Animal Group (CAG) Diagnostics and 34% reported and 33% organic growth income from CAG Diagnostics capital instruments. Overall revenue growth was also supported by reported revenue growth of 15% and organic growth of 13% in the Water business.

Segment analysis

IDEXX derives its revenues from four operating segments: CAG, Water, Livestock, Poultry and Dairy (LPD), and Others.

In the third quarter, CAG revenue increased 15% (up 13% organically) year-over-year to $ 732.5 million. Water segment revenues also increased 15% (up 13% organically) year-over-year to reach $ 38.1 million. However, LPD’s revenue fell 21% (down 23% organically) to $ 29.1 million. Revenues for the Other segment decreased 21.2% on a reported basis to $ 10.7 million.

Margins

Third quarter gross profit increased 11.9% to $ 472.9 million. However, gross margin contracted 19 basis points (bps) to 58.4% on a 12.8% increase in revenue cost to $ 337.5 million.

Selling and marketing expenses increased 15% to $ 124.4 million, while general and administrative expenses decreased 21.8% to $ 82.1 million. Research and development expenses increased 7.8% to $ 40.4 million.

Overall, operating income for the reported quarter was $ 225.9 million, reflecting a 31.5% year-over-year improvement. The operating margin in the quarter increased 407 basis points to 27.9%.

Financial situation

IDEXX exited third quarter 2021 with cash and cash equivalents of $ 145.2 million compared to $ 232.1 million recorded at the end of second quarter 2021. Total debt (including current portion) at end the third quarter of 2021 was $ 853 million compared to total debt of $ 905.1 million at the end of the second quarter.

Cumulative net cash generated from operating activities at the end of the third quarter of 2021 was $ 545.6 million, compared to $ 429.1 million a year ago.

Orientation 2021

The company has reduced its revenue forecast for the year to a range of $ 3,185 million to $ 3,200 million, which suggests year-over-year growth of 17.5-18% on a reported basis and from 15.5 to 16% on an organic basis. This compares to previously provided revenue guidance of $ 3,170 to $ 3,205 million, which showed growth of 17-18.5% on a reported basis and 14.5-16% on an organic basis. Zacks’ consensus estimate for the same is currently set at $ 3.19 billion.

CAG Diagnostics’ recurring revenue is now expected to grow 18.5-19.5% on a reported basis and 17-17.5% on an organic basis (reduced from previously published growth forecast of 18-19.5% on a reported basis). published and from 16 to 17.5% on an organic basis).

Additionally, IDEXX raised EPS guidance for the full year to a range of $ 8.30 to $ 8.38, indicating growth of 24-25% on a reported basis (compared to earlier outlook from $ 8.20 to $ 8.36, indicating reported growth of 22-25%). Comparable growth in constant currencies is expected within a range of 26-27%, compared to the previous range of 25-27%. Zacks’ consensus estimate for full-year EPS is currently set at $ 8.36.

Our opinion

IDEXX ended the third quarter of 2021 with better than expected results. The organic growth of its turnover is encouraging. Sales were driven by strong sales from the CAG and Water activities. The improvement in the operating margin was also an asset.

On the other hand, LPD’s revenues declined in the quarter, limited by comparisons with the high levels of the previous year and additional impacts in China related to changes in local approaches to managing ASF diseases. , declining pork prices and changes in government requirements for testing for infectious diseases in livestock. programs. In addition, the shrinking gross margin and escalating operating costs are of concern.

Zacks rank and actions to consider

The company currently wears a Zacks Rank # 3 (Hold).

Some top-ranked stocks in the broader medical space that have announced quarterly results are Thermo Fisher Scientific Inc. (TMO Free report), SARTORIUS (SARTF Free report) and Western Pharmaceutical Services, Inc. (WST Free report).

Thermo Fisher, ranked first in Zacks (strong buy), reported adjusted EPS of $ 5.76 in Q3 2021, beating Zacks’ consensus estimate by 23.3%. Third-quarter revenue of $ 9.33 billion exceeded the consensus mark by 12%. You can see the full list of today’s Zacks # 1 Rank stocks here.

SARTORIUS announced third quarter 2021 adjusted EPS of $ 2.55, beating Zacks’ consensus estimate by 7.6%. Revenue of $ 1.06 billion was 5.2% higher than Zacks’ consensus estimate. He currently wears a Zacks Rank # 2 (Buy).

West Pharmaceutical reported adjusted EPS of $ 2.06 in the third quarter of 2021, beating Zacks’ consensus estimate by 13.2%. Revenue of $ 706.5 million was 3.2% higher than Zacks’ consensus estimate. He currently wears a Zacks Rank # 2.


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