At IDEXX Laboratories, everything revolves around animal welfare. In other words, if a rabbit, dog or horse has a problem, the company's diagnostic and software products provide the veterinarian with clarity. The Westbrook, USA-based company offers everything from practice management software, benchtop laboratory systems and consulting services to diagnostic tests and herd monitoring systems. IDEXX has now been on the market for exactly 30 years and now employs over 9,000 people in more than 175 countries.
Like many other industries, IDEXX was hit by the Corona virus. Staffing shortages, as well as reduced visits to veterinary clinics due to the pandemic-related lockdowns, have tugged at the animal health services provider's growth. But that's all over now; so far this year, the company is showing strong operating performance. To start the year, revenues increased 8% to USD 900 million, beating expectations by 1.5%. Diagnostics and software were the main contributors to the increase. Earnings progressed even faster. Earnings per share (EPS) improved by 12.3%, beating forecasts by as much as 7.1%.
In the second quarter, the positive trend continued and IDEXX once again outperformed analysts' estimates. Sales increased by 9.7% to USD 943.6 million, experts had on average only expected USD 934.42 million. Revenues in IDEXX's largest pet division, through which the company provides veterinary clinics with diagnostic and IT services for pets, grew disproportionately by 10.5%. On the earnings side, the upward trend was even more dynamic. For the three months to June 30, the company reported a profit of USD 224.2 million, up a whopping 70%.
Not only did the company, founded in 1983, once again beat expectations, but management also raised its 2023 targets for the second time this year. The lower end of the forecast for organic sales growth was raised from 7.5% to 8.5%, while the upper end was left at 10%. In addition, the company expects recurring pet sales to increase 10% to 11% in the current fiscal year, compared with a previous estimate of 9% to 11%.
EPS guidance, which was raised in early May, was maintained. It is expected to be between USD 9.33 and USD 9.75, an increase of 16% to 21%. The consensus estimate for full-year EPS is currently USD 9.83, above the target range.
With two sprints, one in January and one in July, IDEXX shares moved strongly higher this year. In the meantime, a gain of almost 39% was recorded. However, the short-term rallies were followed by an extended consolidation. The first phase lasted about 6 months, and the S&P 500 member is currently in the middle of the second. The correction even led the stock back into the sideways trend channel of the first half of the year. The 10 analysts covering IDEXX Laboratories give an average 12-month price target of USD 595, which corresponds to a price increase of about one fifth.
However, the positive analyst assessments are not yet a guarantee that IDEXX shares will quickly resume their upward trajectory. Especially since the 2024 P/E ratio is more than twice as high as the average growth rates until then. A prolonged consolidation can be cleverly countered with the new Softcallable Barrier Reverse Convertibles. The yield enhancement products on the US blue chip, which are offered in CHF and USD, each have a risk buffer of a solid 35%. This means that even a setback towards the low for the year would not pose a problem. If the bluechip leaves the barrier intact during the maximum term of 15 months, the maximum return will be achieved. The product listed in CHF has a coupon of 9.00% p.a., while in USD the maximum yield is as high as 12.00% p.a. For both BRCs, the issuer's softcallable function allows early termination after half a year at the earliest.
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