The outlook calls for revenue an earnings gains in 2025, and margin expansion.
On a volatile day for stocks, IDEXX Laboratories (NASDAQ:IDXX) stood out as one of the top performers, with shares rising more than 11% on the day to around $470 per share.
The pet healthcare company, which provides diagnostic tools, technology, medical equipment and services to veterinarians, saw its stock soar on robust fourth quarter earnings.
IDEXX topped revenue and earnings estimates in Q4. The company generated $954 million in revenue in the quarter, up 6% year over year. That exceeded estimates of $935 million.
Net income rose 11% to $216 million, while earnings climbed 13% to $2.62 per share. That was far better than estimates of $2.40 per share.
Impressive profit margins
IDEXX has three main business lines, with its Companion Animal Group (CAG) being the largest. In this segment, it provides testing and diagnostic tools and technology to help vets treat household pets.
This business made $870 million in revenue, representing 91% of the total. It saw 6% revenue growth in the quarter, bolstered by its IDEXX VetLab testing equipment, which posted a 12% revenue increase. Revenue from the U.S. rose 4.4% in the quarter to $574 million while international revenue spiked 9.2% to $296 million.
The water testing segment grew revenue 8% to $45 million, while the livestock, poultry, and dairy diagnostic business saw revenue climb 5% higher to $35 million.
IDEXX produced strong margins in the quarter, with a gross profit margin of 59.8%, up 140 basis points year over year. The operating margin was also high at 27.4%, up 20 basis points higher than the prior year period results. This factors in a 10% increase in operating expenses, reflecting investments in commercial resources and R&D initiatives.
Promising 2025
In the earnings release, IDEXX President and CEO Jay Mazelsky cited a “promising 2025 and beyond,” supported in large part by some new innovations, including a cancer screening tool.
“The company is on the front end of a new wave of major innovation. In Q4, we began shipping the IDEXX inVue Dx Cellular Analyzer, our transformational slide-free cellular analyzer, and we plan to make IDEXX Cancer Dx screening for canine lymphoma available in late March 2025 in the U.S. and Canada,” Mazelsky said. “These types of innovations are highly sought-after by our customers and will dramatically enhance veterinarians’ approaches to care management and address workflow bottlenecks in their practices.”
This optimism is reflected in IDEXX’s outlook for 2025. The company anticipates annual revenue of $4.055 billion to $4.170 billion – an increase of 4% to 7% and 6% to 9% organic growth.
The operating margin for fiscal 2025 is targeted at 31% to 31.5%, which is 200 to 250 basis points higher than 2024.
Further, earnings are projected to be $11.74 to $12.24 per share – a 10% to 15% jump over the previous year. In addition, operating cash flow is expected to be 100% to 110% of net income while free cash flow is targeted at 85% to 90% of net income.
Is IDEXX stock a good buy?
Some analysts lowered IDEXX’s price target, like Morgan Stanley, which dropped the target by $9 to $550. That’s still a 17% gain over the current price, but Morgan Stanley was being slightly more cautious, citing a trend of lower vet visits.
IDEXX has a median price target of $500, which is about a 6% gain.
The stock is a bit pricey with a P/E of 40. It has some nice momentum, but macroeconomic concerns are worth watching and warrant caution.
