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IDEXX (IDXX) CAG Placement Grows Globally Amid Cost Woes

IDEXX Laboratories, Inc.'s IDXX robust worldwide commercial capabilities and best-in-class products, including its next-generation chemistry analyzer, Catalyst One, will be the key growth drivers in the days to come. The stock carries a Zacks Rank #2 (Buy), at present.

Over the past six months, IDEXX has been outperforming its industry with respect to share price movement. The stock has gained 44.5% compared with the 21.1% rise of the industry. IDEXX exited the second 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 CAG, LPD, and Water businesses.

The company witnessed sturdy gains in CAG Diagnostics’ recurring revenues, supported by sustained strong global trends in pet healthcare in the quarter under review. The company’s performance in major geographies is also encouraging. Further, veterinary software, services, and diagnostic imaging systems revenues grew in the reported quarter driven by double-digit growth in subscription-based service revenues and strong growth in new veterinary software system placements and recurring software services. The acquisition of ezyVet also contributed to growth. The raised 2021 guidance is encouraging as well.

IDEXX Laboratories, Inc. Price and Consensus

IDEXX continues to demonstrate solid growth globally. International revenues in the second quarter of 2021 were up 23.1% organically, aided by a 27.4% rise in CAG Diagnostics’ recurring revenues. This reflected robust gains in the United States as well as international markets.

Global Reference Lab revenues increased 25% organically, reflecting more than 20% organic growth in the United States and 30% growth in international markets. The international reference lab gains were driven by strong growth in Europe, supported by IDEXX’s new Germany-based core lab capability, the company’s expanded commercial presence, and growth in IDEXX 360 program agreements. High same-store volume growth along with strong gains across testing categories continued to drive global reference lab revenues.

Further, IDEXX’s VetLab consumable revenues increased 26% on an organic basis in the second quarter, maintaining more than 20% growth rate over successive quarters in the United States and nearly 30% organic gains in international regions.

On the flip side, contraction of gross margin and escalating operating costs are discouraging. Gross margin contracted 27 basis points (bps) to 59.2% on a 30.4% rise in the cost of revenues in the quarter. Sales and marketing expenses rose 26.4% while general and administrative expenses moved up 21.7%. Research and development expenses climbed 19.1% in the quarter.

A weak capital structure and foreign exchange headwind remain concerns.

Key Picks

A few better-ranked stocks from the broader medical space are Envista Holdings Corporation NVST, BellRing Brands, Inc. BRBR, and Biolase, Inc. BIOL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 27%.

BellRing Brands has an estimated long-term earnings growth rate of 29%.

Biolase has a projected long-term earnings growth rate of 15%.

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