
IDEXX 3Q23 Shows Beginning Signs of a Vet Consumer Slowdown; Pricing Drives Majority of Growth in Quarter, But is it Sustainable
11-1-23 (by: Scott Gleason) IDEXX Laboratories has reported its financial results for the third quarter of 2023 with total revenues of $916 million, growing 9% on a reported basis and 8% organically. The street was predicting total revenue in the quarter of $926.8 million. The company’s Companion Animal Group (CAG), which comprises the majority of revenue, grew by 9% as well. Growth outside the U.S. was double-digits with single digit growth within the U.S. Management highlighted that vet same store sales declined by 2% based on a decline in vet visits. Given the still strong consumer environment in the third quarter and signs of weakening trends this could be the canary in the coal mine to softening vet diagnostic trends ahead. The company guided to continued pressure on same store sales in the fourth quarter in both U.S. and international markets. The company is currently benefitting from 6-7% price increases in the second half of the year in its companion animal growth translating to low-single digit volume growth.
IDEXX VetLab® consumables saw a 13% revenue growth, with double-digit gains in both U.S. and international regions, reference laboratory diagnostic and consulting services grew 8%, rapid assay products revenues grew by 9%, and veterinary software, services, and diagnostic imaging systems revenues grew 14%. The company placed 4,571 companion animal instruments in the 3Q23, a 4% year-over-year decline. Management noted that for the first time in four years it is growing the size of its U.S. commercial team. The company’s Water testing business grew 9% and its Livestock and Poultry Diagnostics division grew 5%.
Adjusted earnings per diluted share for the third quarter were $2.50, increasing 16%. Analysts had forecast adjusted EPS of $2.37 for the quarter.
Jay Mazelsky, President and Chief Executive Officer of IDEXX Laboratories, attributes this strong performance to the dedication and execution of IDEXX teams. He emphasized that busy veterinarians are increasingly recognizing the need for testing before determining the optimal treatment course, which drives medical services activity in their practices. They are also keen to have testing solutions seamlessly connected to modern cloud-based Practice Information Management Systems (PIMS) while investing in software that boosts staff productivity and client communications. IDEXX remains well-positioned to meet these needs through innovation and commercial engagement.
For the full year 2023, IDEXX Laboratories has lowered its revenue growth outlook to 7.9% – 8.4% as reported and 8.3% – 8.8% organically. The company noted that its updated outlook is based on the third quarter’s results and headwinds to clinical visit growth rates globally. The company had been forecasting total growth of 8.5% to 10%.
The company also increased its full-year reported operating margin outlook to 29.6% – 29.8%, accounting for strong year-to-date profit performance. Additionally the company’s EPS guidance went up to the higher end of the range and IDEXX is now calling for EPS of $9.74 – $9.90.