A month has gone by since the last earnings report for Idexx Laboratories (IDXX Quick QuoteIDXX - Free Report) . Shares have added about 11.1% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.

IDEXX Tops Q3 Earnings, Cuts '23 Sales Guidance

IDEXX Laboratories, Inc. posted third-quarter 2023 earnings per share  of $2.53, up 17.7% year over year. The figure surpassed the Zacks Consensus Estimate by 6.8%.

In the third quarter of 2023, comparable constant-currency earnings per share of $2.50 improved 16.3% year over year.

Revenues in Detail

Third-quarter revenues increased 8.8% year over year to $915.5 million. Organically, growth was 8%. However, the metric missed the Zacks Consensus Estimate by 0.8%.

The year-over-year upside was primarily driven by 9% reported and 8% organic growth in Companion Animal Group (“CAG”) revenues and Water revenue growth of 9% reported and 7% organic.

CAG Diagnostics’ recurring revenues increased 10% on a reported basis and 9% on an organic basis, supported by the sustained benefits of IDEXX execution drivers and also reflects double-digit organic revenue growth in the United States and international regions.

Veterinary software, services and diagnostic imaging systems’ revenues increased 14% on a reported basis and 13% organically, reflecting continued high growth in recurring revenues and ongoing momentum in cloud-based software placements.

Segmental Analysis

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

In the third quarter, CAG revenues rose 9% on a reported and 8% on an organic basis year over year to $837.2 million. Our model projected the segment’s revenues to be $840.6 million.

The Water segment’s revenues increased 9% (up 7% organically) year over year to $44.5 million. This figure compares with our model’s segmental projection of $38.3 million for the third quarter.

For the third quarter, LPD revenues increased 5% on a reported basis (up 2% organically) to $29.7 million. Per our model, projected revenues from this segment were $25.5 million.

Revenues in the Other segment fell 43.5% on a reported basis to $4.2 million. The figure missed our segmental projection of $7.7 million for the third quarter.

Margins

The gross profit in the third quarter rose 8.2% to $548 million. The gross margin contracted 34 basis points (bps) to 59.9% on a 9.7% rise in the cost of revenues to 367.5 million.

Sales and marketing expenses rose 4.4% to $136 million, while G&A expenses increased 6.3% to $89 million.  R&D expenses dropped 0.1% to $48 million.

Overall, the operating profit in the reported quarter was $275.3 million, up 12.4% year over year. The operating margin in the quarter expanded 98 bps to 30.1%.

Financial Position

IDEXX exited the third quarter of 2023 with cash and cash equivalents of $331.7 million compared with $132.8 million at the end of the second quarter. The total debt (including the current portion) at the end of the third quarter of 2023 was $768.8 million, sequentially down from $771.8 million at the end of the second quarter.

The cumulative net cash provided by operating activities at the end of the third quarter of 2023 was $656.7 million compared with $506.9 million in the prior-year comparable period.

2023 Guidance

IDEXX provided an updated outlook for the full year 2023.

The company expects total revenues to grow in the range of $3.635 billion-$3.650 billion (the earlier projection was in the band of $3.660 billion-$3.715 billion). This suggests growth of 7.9%-8.4% on a reported basis and 8.3%-8.8% on an organic basis, down from the earlier projected growth of 8.5, both reported and organically. The Zacks Consensus Estimate is currently pegged at $3.67 billion.

IDEXX’s full-year earnings per share guidance is now pegged in the range of $9.74-$9.90 (up from the previous band of $9.64-$9.90). This updated guidance indicates reported growth of 21, compared to the previous projected growth of 20. The Zacks Consensus Estimate for the full-year earnings per share is currently pegged at $9.8.

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 a nice Growth Score of B, a grade with the same score on the momentum front. 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 belongs to the Zacks Medical - Instruments industry. Another stock from the same industry, Thermo Fisher Scientific (TMO Quick QuoteTMO - Free Report) , has gained 10.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Thermo Fisher reported revenues of $10.57 billion in the last reported quarter, representing a year-over-year change of -1%. EPS of $5.69 for the same period compares with $5.08 a year ago.

Thermo Fisher is expected to post earnings of $5.64 per share for the current quarter, representing a year-over-year change of +4.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.2%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Thermo Fisher. Also, the stock has a VGM Score of D.