IDEXX Labs Is 'Top Dog'

IDEXX Laboratories, Inc. IDXX hosted last week its annual Analyst Day presentation which prompted analysts at Bank of America to upgrade the stock and label it a "top dog." The firm's Derik de Bruin upgrades Idexx's stock rating from Neutral to Buy with an unchanged $175 price target.

Idexx's management didn't quantify its near-term outlook but provided sufficient data points to support its long-term targets of:

1. 10 percent organic revenue growth.
2. 15 to 20 percent earnings per share compounded annual growth through 2022.

The most "striking" new dataset suggested that out of the total approximately 200 million annual clinical veterinarian visits in the U.S., a mere 80 million included any sort of Dx test, and a smaller 24 million visits included a chemistry panel.

As such, the analyst left the presentation "feeling more positive" on the various levers the company has to drive growth, including higher Dx (diagnostic) utilization from its installed base, a ramp-up of new products, and continued innovation.

Meanwhile, the animal Dx market is "still largely untapped" and Idexx doesn't have to deal with a heightened competitive environment over the near-term, de Bruin continued.

Idexx's stock is trading at 42x the analyst's 2018 earnings per share estimate, which does mark a premium to the broader peer group, but this is justified given management's achievable outlook of 10 percent long-term revenue growth and 15–20 percent earnings per share growth, the analyst concluded. Encouragingly, there is room for additional upside to the long-term guide from new product launches and the analyst believes that a "slightly more aggressive outlook is warranted."

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