IDEXX Laboratories (IDXX) Q1 Earnings: Surprise In Store?

IDEXX Laboratories, Inc. (NASDAQ:IDXX) is slated to report first-quarter 2017 results on Apr 28, before the opening bell.

Last quarter, the company posted a positive earnings surprise of 13.73%. Further, IDEXX’s earnings outpaced the Zacks Consensus Estimate in the past four quarters, the average being 14.68%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

IDEXX achieved strong organic growth in the U.S. and international regions in the last-reported fourth quarter of 2016, driven by significant expansion in the Companion Animal business. The company expects this bullish trend to continue in the upcoming quarters as well. Overall, management expects 8.5–10% revenue growth in the first quarter of 2017, reflecting organic gains of 10–11%. IDEXX also reaffirmed its full-year 2017 organic revenue growth outlook at 9–10.5%.

On the bottom-line front, the company raised its 2017 EPS guidance to $2.85–$3.01 from $2.35–$2.39 supported by continued operating margin expansion aligned with its long-term goals. The Zacks Consensus Estimate for EPS is pegged at $2.95, which is within the guided range.

IDEXX is one of the leading players in the companion animal health space. The company is currently working on the launch of several products in this space which include updated instrument software of SediVue, PROREAD software and VetConnect PLUS. We expect these launches to boost the top line in the yet-to-be reported quarter.

This apart, IDEXX continues to display solid growth with respect to international expansion. The company has been significantly benefitting from the companion animal market of emerging nations such as China and Brazil, demonstrating the bountiful opportunities. Further, management’s consistent share buybacks reflect its strong free cash flow reserve. We believe, the outcome of these endeavors will be reflected in the first-quarter’s performance.

On the flip side, foreign currency fluctuation is a major headwind for the company. Another concern is the company’s high reliance on third-party distributors. The purchasing dynamics of distributors have a significant impact on the company’s sales of instrument consumables and rapid assay products.

Also, the competitive landscape in the domestic and overseas markets weighs on IDEXX’s performance. This struggle to gain market share might also prove to be a drag on the first-quarter 2017 results.

Last month, IDEXX joined the prestigious NASDAQ-100 Index following its listing under the S&P 500 category around two months back. This is expected to significantly boost investors’ confidence on the stock.

Earnings Whispers

Our proven model does not conclusively show that IDEXX is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 for this to happen. However, that is not the case here, as you will see below.

Zacks ESP: IDEXX has an Earnings ESP of 0.00%. That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 62 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: IDEXX’s Zacks Rank #3 increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:

Galectin Therapautics, Inc. (NASDAQ:GALT) has an Earnings ESP of +13.33% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hill-Rom Holdings Inc (NYSE:HRC) has an Earnings ESP of +1.27% and a Zacks Rank #2.

Syros Pharmaceuticals, Inc. (NASDAQ:SYRS) has an Earnings ESP of +3.85% and a Zacks Rank #2.

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