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IDEXX Laboratories Barks Out Another Successful Quarter

By Brian Orelli, PhD - May 11, 2018 at 4:47PM

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The animal-diagnostics company posts another quarter of double-digit growth.

IDEXX Laboratories (IDXX -0.06%), a member of the Motley Fool 100 Index, kicked off the year with a solid first quarter, growing top and bottom lines by double digits.

IDEXX Laboratories results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

Revenue

$537.7 million

$462.0 million

16%

Income from operations

$113.0 million

$92.2 million

23%

Earnings per share

$1.01

$0.77

31%

Data source: IDEXX Laboratories.

What happened with IDEXX Laboratories this quarter?

  • Revenue growth was helped by currency changes, but even looking at organic growth, revenue was up a solid 12%.
  • Revenue from the companion animal group led the way, up 13% organically, with sales of consumables up 17% organically. Instrument placements, which will drive consumable sales in future quarters, continued to grow with the number of premium analyzers placed in veterinarian offices up 21% year over year.
  • Revenue from IDEXX's reference laboratory diagnostic and consulting services, where it runs the tests for veterinarians, increase 14% on an organic basis, while sales of rapid assay products were up 7% organically.
  • Sales of water-testing products were up 12% organically, thanks to direct sales in Brazil.
  • The only real downer was products for livestock, poultry, and dairy, which only grew sales 2% on an organic basis, although the category is becoming an increasingly smaller portion of IDEXX's sales as the companion animal group increases.
  • The long awaited kidney function SDMA test launched on the company's Catalyst Dx machines so vets can do the test in-house.
  • The company said the launch of its SNAP fecal test won't happen until the beginning of next year.
Technician using a Catalyst Dx

Image Source: IDEXX Laboratories

What management had to say

Jonathan Ayers, IDEXX's chairman, president, and CEO, highlighted the early success of the SDMA test in its first quarter on the market:

In this short period, 42% of North American Catalyst customers have adopted the test in the clinic, with the vast majority of these already using it on a regular basis. Having our proprietary SDMA test on our in-house instrument advances several strategic growth objectives for IDEXX.

IDEXX has been using an economic value index (EVI) for sales representative commissions, where new accounts have higher commissions because they'll ultimately make more money for the company than repeat customers upgrading or adding a second machine, which it has rolled out to the rest of the world with good success. As Ayers pointed out:

For the rest of the world, the year-over-year growth in EVI from instrument placements was far stronger supported by both strong unit placement and a greater percentage of Catalyst placements to new and competitive accounts. Of note, new and competitive placements of Catalyst outside of North America was up 56% year over year in Q1.

Looking forward

Based on the solid first quarter, management upped its guidance for organic revenue growth by 1 percentage point, to 10.5% to 12.5% for the year. On a reported basis, the revenue guidance is staying the same because currency changes since the guidance was first issued will eat away the organic gains. Considering the company has control over organic growth, which is going up, but not currency changes, it's an OK trade for investors.

On the bottom line, management upped its earnings outlook by $0.02 per share to a range of $4.06 - $4.20 per share. Like the revenue line, organic sales growth will be cancelled out by currency changes, with the $0.02 increase coming from better share-based compensation activity.

Brian Orelli has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Idexx Laboratories. The Motley Fool has a disclosure policy.

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