A month has gone by since the last earnings report for Idexx Laboratories (IDXX). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Idexx due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

IDEXX Q4 Earnings Top Estimates, Margins Contract

IDEXX Laboratories, Inc. posted fourth-quarter 2023 earnings per share of $2.32, up 13.2% year over year. The figure surpassed the Zacks Consensus Estimate by 9.4%.

In the fourth quarter of 2023, comparable constant-currency EPS of $2.34 improved 29% year over year.

Full-year 2023 earnings of $10.06 rose 25% from the 2022 level. The figure exceeded the Zacks Consensus Estimate by 1.9%.

Revenues in Detail

Fourth-quarter revenues increased 8.8% year over year to $901.6 million. Organically, growth was 8%. The metric surpassed the Zacks Consensus Estimate by 1.5%.

The year-over-year upside was primarily driven by 10% reported and 9% organic growth in Companion Animal Group (“CAG”) revenues.

CAG Diagnostics’ recurring revenues increased 11% on a reported basis and 10% on an organic basis, supported by the sustained benefits of IDEXX execution drivers, including high-quality placement of CAG Diagnostics capital instruments across regions, high customer retention, new business gains and net price realization.

Veterinary software, services and diagnostic imaging systems’ revenues increased 6% on a reported basis as well as organically, reflecting double-digit growth in recurring revenues and a strong interest in its cloud-based veterinary software solution.

Full-year total revenues of $3.66 billion improved 9% on a reported basis as well as organically from the 2022 level, driven by 10% reported and 10.5% organic growth in CAG Diagnostics recurring revenues. The figure beat the Zacks Consensus Estimate by a close margin of 0.3%.

Segmental Analysis

IDEXX derives revenues from four operating segments — CAG, Water, Livestock, Poultry and Dairy (“LPD”) and Other.

In the fourth quarter, CAG revenues rose 10% on a reported basis and 9% on an organic basis year over year to $821.3 million.

The Water segment’s revenues increased 6% (up 5% organically) year over year to $41.8 million.

For the fourth quarter, LPD revenues decreased 2% on a reported basis (down 4% organically) to $32.8 million.

Revenues from the Other segment fell 21.4% on a reported basis to $5.8 million.

Margins

Gross profit in the fourth quarter rose 8.5% to $526.2 million. However, gross margin contracted 17 basis points (bps) to 58.4% on a 9.3% rise in the cost of revenues to $375.4 million.

Sales and marketing expenses rose 7.7% to $142 million, while G&A expenses increased 4.8% to $87 million.  R&D expenses rose 19.3% to $51.8 million.

Overall, operating profit in the reported quarter was $245.3 million, up 8.3% year over year. The operating margin in the quarter, however, contracted 13 bps to 27.2%.

Financial Position

IDEXX exited 2023 with cash and cash equivalents of $453.9 million compared with $112.5 million at the end of 2022. Total debt (including the current portion) at the end of the fourth quarter of 2023 was $697.9 million compared with $769.4 million at the end of the year-ago period.

The cumulative net cash provided by operating activities at the end of 2023 was $906.5 million compared with $542.9 million in the prior-year comparable period.

2024 Guidance

IDEXX provided an updated outlook for 2024.

The company expects total revenues to be in the range of $3.93 billion-$4.04 billion. This suggests growth of 7.5%-10.5% on a reported basis and 7 on an organic basis. The Zacks Consensus Estimate is currently pegged at $3.94 billion.

IDEXX guided full-year EPS in the range of $10.84-$11.33. This updated guidance indicates reported growth of 8. The Zacks Consensus Estimate for full-year EPS is currently pegged at $11.04.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

At this time, Idexx has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Idexx has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Idexx is part of the Zacks Medical - Instruments industry. Over the past month, Thermo Fisher Scientific (TMO), a stock from the same industry, has gained 4.3%. The company reported its results for the quarter ended December 2023 more than a month ago.

Thermo Fisher reported revenues of $10.89 billion in the last reported quarter, representing a year-over-year change of -4.9%. EPS of $5.67 for the same period compares with $5.40 a year ago.

Thermo Fisher is expected to post earnings of $4.71 per share for the current quarter, representing a year-over-year change of -6.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.

Thermo Fisher has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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