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IDEXX Laboratories: Strong Instrument Placement Drives Q1

On May 30, we issued an updated research report on Delaware, NJ-based IDEXX Laboratories, Inc. IDXX – a manufacturer and distributor of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. The company currently carries a Zacks Rank #2 (Buy).

IDEXX started off 2016 on a strong note, with its first-quarter results squarely beating the Zacks Consensus Estimate. Strong instrument placements, global lab momentum reflecting the company’s leverage of expanded commercial capability as well as strong test menu expansion were some of the key highlights for IDEXX’s business at the start of 2016.

Moreover, IDEXX continued to demonstrate solid growth globally with strong international expansion as is evident from the double digit organic revenue growth observed in the overseas. Moreover, during the first quarter, the company successfully placed 714 catalysts and 1,150 premium instruments in its international market.

Strong consumable revenue growth owing to high levels of instrument placements as well as improved lab revenue gains primarily drove this overseas growth. Management was particularly upbeat about the continued growth observed in premium instrument placements.

With respect to its Companion Animal Group (CAG) segment, IDEXX witnessed strong recurring Diagnostic gains across the U.S., Canada, Europe, Asia Pacific and Latin America. Moreover, the company noticed moderate growth in net customer acquisition cost, reflecting its success in differentiating its diagnostic technologies from competitive offerings.  The company also holds a strong cash balance position.

On the flip side, foreign currency headwinds are a major issue, with approximately 38% of IDEXX’s sales coming from overseas. Evidently, foreign exchange fluctuations affected the company’s revenue growth in the first quarter by 2% and EPS by $0.05 per share, including the impact from the 2015 hedge gains.

Moreover, the instrument consumables and rapid assay products in the company’s CAG segment are often sold by third-party distributors. Unfavorable distributor purchasing dynamics can affect the company’s sales growth for these products. Competitive headwinds also pose threat to the stock.

Key Picks in the Sector                 

Better-ranked medical stocks are Baxter International Inc. BAX, Boston Scientific Corporation BSX and SurModics, Inc. SRDX.  While Baxter sports a Zacks Rank #1 (Strong Buy), Boston Scientific and SurModics carry a Zacks Rank #2.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
IDEXX LABS INC (IDXX): Free Stock Analysis Report
BOSTON SCIENTIF (BSX): Free Stock Analysis Report
BAXTER INTL (BAX): Free Stock Analysis Report
SURMODICS (SRDX): Free Stock Analysis Report
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