Idexx Laboratories under pressure as Wall Street digests quarterly results

Shares of Idexx Laboratories (IDXX) are slipping although the company reported better than expected quarterly results on Friday. Commenting on the earnings release, Bank of America Merrill Lynch analyst Michael Ryskin told investors that he believes the “story stays intact” despite lots of moving pieces and fiscal year guide refinements. QUARTERLY RESULTS: On Friday, Idexx Laboratories reported fourth quarter earnings per share of 98c and revenue of $549.39M, both above analysts’ consensus of 91c and $546.7M, respectively. For fiscal year 2018, the company reported earnings per share of $4.26, better than the expected $4.20, and revenue of $2.213B, which was also slightly better than analysts’ consensus of $2.21B. Additionally, Idexx raised its 2019 earnings per share outlook range by 4c from the midpoint of prior guidance to $4.66-$4.78, reflecting flow through of strong 2018 profit performance, partially offset by lower estimates for projected share-based compensation tax benefits. The company also reaffirmed 2019 revenue guidance of $2.385B-$2.425B and said it achieved revenue growth in the fourth quarter of 9% on a reported basis and 10% on an organic basis, driven by CAG Diagnostics recurring revenue growth of 12% reported and 13% organic. Analysts currently expected FY19 EPS of $4.69 and revenue of $2.41B. STORY REMAINS INTACT: In a post-earnings note, Bank of America Merrill Lynch’s Ryskin told investors that, for the most part, the Idexx core business continues to impress as CAG recurring revenues posted their best year since 2015, and Consumables finished the year on a “particularly good note.” The only pocket of softness continues to be the International reference lab, he pointed out, adding that with Idexx’s emphasis on driving in-clinic/point-of-care placements and revenues, it seems increasingly likely that OUS reference lab will remain somewhat subdued throughout 2019. Overall, Ryskin believes the negative reaction to the fourth quarter results seems to be largely driven by a number of refinements to the 2019 guide as the company now sees CAG recurring as 11%-12% versus prior 11.5%-12.5%, and constant currency OpM expansion is now 50-80bps versus prior 50-100bps. Following the analyst’s conversations with Idexx, he does not see these changes as an indication of any material change in the outlook, and are more reflective of fine-tuning the model following fourth quarter results. He reiterated a Buy rating and $235 price target on the shares. PRICE ACTION: In afternoon trading, shares of Idexx Laboratories have dropped just over 1% to $203.17.

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