IDEXX Laboratories, Inc.’s IDXX fourth-quarter performance was driven by the consistent strong performance of the Companion Animal Group (“CAG”) segment. Solid performance in the international markets is encouraging. However, unfavorable solvency and the currency movement remain our concerns for IDEXX’s operations. 

In the past year, this Zacks Rank #3 (Hold) company’s shares have lost 20% against 15.1% growth of the industry and 23.2% rise of the S&P 500 composite.

The renowned medical device company has a market capitalization of $36.40 billion. IDEXX has an earnings yield of 2.68%, which compares favorably with the industry’s -3.36%. IDEXX’s earnings surpassed estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 0.78%.

Let’s delve deeper.

Upsides for IDXX

CAG Continues to Perform Well: IDEXX’s focus on innovation in CAG has resulted in a highly compelling portfolio of products and services. Over the past few quarters, recurring revenue growth of CAG Diagnostics has remained consistently above that of the sector. 

In the fourth quarter of 2024, worldwide CAG Diagnostics’ recurring revenues increased 4% organically, supported by an average global net price improvement of approximately 4-4.5%, with the U.S. net price realization of approximately 3.5%. Also, recurring revenue growth was driven by 12% international organic gains.

Internationally, the growth can be attributed to the benefits from net price realization, continued solid volume gains, and a 1% positive equivalent days effects. Additionally, the growth was supported by new business expansion, which was reflected in a double-digit year-on-year growth in the international premium instrument installed base. Further, the company generated substantial revenues and margins from selling consumables used in IDEXX VetLab instruments.

Strong Global Performance: IDEXX is focused on growing its global commercial capability to sustain strong CAG Diagnostics recurring revenue growth. The expanded global commercial capability is yielding strong results overseas, with a notable 12% organic growth in international CAG diagnostic recurring revenues in the fourth quarter of 2024. The company is particularly witnessing strong global gains in consumable revenues, banking on strong gains across its Catalyst, Premium Hematology and SediVue platforms. In 2024, consumable gains were supported by a 9% increase in the global premium instrument installed base.

In the fourth quarter, IDEXX VetLab consumable’s organic revenue growth was driven by robust double-digit growth in international regions. Additionally, global lab revenues expanded 4% organically, reflecting solid normalized volume growth in the international regions.

Water segment revenues increased 9% organically, aided by strong performance in Europe. 

Concerns for IDEXX

Solvency Position: IDEXX closed 2024 with cash and cash equivalents of $288.3 million, down from $453.9 million recorded at the end of 2023. The company has a corresponding short-term debt of $418.0 million, higher than the cash level. Meanwhile, long-term debt (net of the current portion) dropped 27.8% year over year to $449.8 million but remained higher than the cash levels.

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Foreign Exchange Headwind: A majority of IDEXX's consolidated revenues are from product sales in international markets, with approximately 35% of total revenues in 2024 derived from products manufactured in the United States and sold internationally in local currencies. The strengthening of the U.S. dollar has negatively impacted the company’s revenues from these international transactions. In 2024, currency fluctuations had a limited impact on revenue growth, leading to a $5 million impact on operating profits and a decrease of 5 cents in EPS, net of $6 million in hedge gains.

IDXX Stock Estimate Trend

The Zacks Consensus Estimate for 2024 earnings per share (EPS) has moved down 1 cent to $10.43 in the past 30 days.

The Zacks Consensus Estimate for 2024 revenues is pegged at $3.88 billion, suggesting a 5.9% rise from the year-ago reported number.

Key MedTech Picks

Some better-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Veracyte VCYT and Quest Diagnostics DGX. 

Phibro Animal Health has an estimated fiscal 2025 earnings growth rate of 43.7% compared with the industry’s 14.4%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 27.06%. Its shares have surged 115% compared with the industry’s 15.5% growth in the past year.

PAHC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Veracyte, carrying a Zacks Rank #2 (Buy) at present, has an estimated 2024 earnings growth rate of 138.2% compared with the industry’s 15.4%. Shares of the company have surged 54.4% compared with the industry’s 7.3% growth over the past year. VCYT’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 520.58%.

Quest Diagnostics, carrying a Zacks Rank #2 at present, has an earnings yield of 5.87% compared with the industry’s 4.02%. Shares of the company have rallied 28.4% compared with the industry’s 14.8% growth. DGX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 3.75%.

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