In This Article:
A month has gone by since the last earnings report for Idexx Laboratories (IDXX). Shares have added about 2.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Idexx due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
IDEXX Earnings Beat Estimates in Q2, Margins Rise
IDEXX posted second-quarter 2020 earnings per share of $1.72, reflecting a 20.3% year-over-year rise. The figure surpassed the Zacks Consensus Estimate by 43.3%. Comparable-constant-currency EPS growth was 23%, which excludes the impact of changes in foreign exchange rates and tax benefits of share-based compensation activity.
Revenues in Detail
Second-quarter revenues grew 2.8% year over year to $637.6 million. Organically, growth was 3.6%. The metric exceeded the Zacks Consensus Estimate by 9.9%.
The year-over-year upside was primarily driven by strong global gains in CAG Diagnostics’ recurring revenue growth of 7% on both reported and organic basis. High single-digit organic gains in the United States and international markets also drove the top line. OPTI Medical Systems COVID-19 human PCR testing contributed about 1% to the second-quarter top line. However, second-quarter results were impacted by a fall in new CAG instrument placement levels and Water business revenues, including pressure in non-compliance water testing, impacted by factors related to the COVID-19 pandemic.
Segmental Analysis
IDEXX derives revenues from four operating segments — CAG; Water; LPD; and Other.
In the second quarter, CAG revenues rose 3.4% (up 3.8% organically) year over year to $566.1 million. The Water segment’s revenues were down 19.1% (down 16.2% organically) year over year to $28.1 million. LPD revenues fell 2.6% (up 1.7% organically) to $32.2 million. Revenues at the ‘Other’ segment grew 127.8% both on reported and organic basis to $11.1 million.
Margins
Gross profit in the second quarter rose 6% to $379.3 million. Gross margin expanded 179 basis points (bps) to 59.5% despite a 1.5% fall in cost of revenues to $258.3 million.
Sales and marketing expenses fell 7.1% to $94.2 million, while general and administrative expenses moved up 0.5% to $60.3 million. Additionally, research and development expenses declined 1.9% to $31.6 million. Operating profit in the reported quarter was $193.2 million compared with $164.3 million in the year-ago period. Operating margin in the quarter expanded 382 bps to 30.3%.