Morningstar | Idexx Remains Top Dog in Animal Diagnostics in 2Q; No Change to Our FVE
Idexx Labs proved again that it is best in show when it comes to companion animal diagnostics with stellar second-quarter results. Management upgraded its outlook for the full year, but this had little bearing on our projections, and we’re holding steady on our fair value estimate. Shares continue to trade at lofty levels and reflect a take-out premium, from our perspective. Aside from valuation, we remain fans of this narrow-moat company, its ability to consistently innovate, and how well it partners with veterinarians.As we’ve seen in previous quarters, the companion animal category delivered double-digit growth in constant currency. While the reference lab segment grew 13% organically, the consumables segment for use with benchtop analyzers blew the barn doors off with 18% organic growth year over year. This largely reflects Idexx’s focused efforts to place more analyzers, especially outside the U.S., as well as increased utilization as these animal hospitals adopt more tests for patients. Idexx has been on a tear increasing its installed base ever since it made the strategic decision to move to an all-direct distribution model in early 2015. Rival Abaxis also aggressively pursued analyzer placement, but by 2017 Idexx had clearly pulled ahead. Beyond its strength in the U.S., Idexx is particularly well-positioned to expand in Europe thanks to various acquisitions and central reference labs in that geography. Unlike most of its competitors, Idexx can offer both in-hospital and reference lab solutions in Europe.
IDEXX Laboratories develops, manufactures, and distributes products and provides services primarily for the companion animal veterinary, livestock and poultry, dairy and water testing markets. The company operates primarily through three business segments: Companion Animal Group, which provides diagnostic and information management-based products and services for the veterinary market; Water Quality Products, which designs, develops, manufactures, and distributes products used in the detection of various microbiological parameters in water; and Livestock, Poultry and Dairy, which provides diagnostic products and services for livestock and poultry health.
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