IDEXX raises 2015 sales forecast on predicted demand for new lab tests

Veterinary diagnostics maker IDEXX ($IDXX) produced mixed results in the fourth quarter, announcing disappointing revenues but beating analysts' earnings estimates on Friday. The company posted sales of $352 million for the quarter, down from $354 million in the year-ago period. Analysts had hoped for $363 million in sales, according to Zacks. Earnings came in at $26 million, but without the impact of one-time costs that amounted to 95 cents per share--far better than the 72 cents per share analysts were expecting.

IDEXX has been transitioning to an all-direct sales model--a switch that was reflected in its results. The company's gross margins fell to 51.8% from 53.3% in the same quarter a year ago and the operating margin dropped from 17.3% to 9.9%. Excluding the $10 million in expenses emanating from the transition, operating expenses grew 8%, which the company attributed to "planned increases in global commercial resources."

The company, which sells diagnostic instruments for use in both companion and farm animals, reported total revenues for 2014 of $1.5 billion and earnings per share of $3.58.

IDEXX is optimistic about the future, so much so that the company upped its sales projections for this year. IDEXX now expects organic revenue growth of 13.5% to 14.5%, which would translate to sales of at least $1.6 billion. The company told analysts to expect earnings per share of $4.33 to $4.43 for the year.

"We are entering 2015 with a healthy backlog and good commercial momentum," said Brian McKeon, IDEXX's chief financial officer, during a conference call with analysts and investors following the earnings release.

CEO Jonathan Ayers

IDEXX CEO Jonathan Ayers told analysts on the call he is particularly excited about a new kidney-function test that the company will introduce by summer. The test detects SDMA, a biomarker that can help veterinarians spot early signs of chronic kidney disease (CKD) before pets develop symptoms. Ayers said during the call that "many pet owners … know about CKD due to the fact that one in three cats and one in 10 dogs will in time develop this deadly disease."

Ayers said that IDEXX plans to offer the SDMA test automatically, at no added charge, as part of the broader chemistry panel the company already sells to veterinary clinics. That "creates a compelling and differentiated value proposition," Ayers said. IDEXX is also gearing up to offer two new tests for intestinal parasites in dogs and cats, he said.

When one analyst on the earnings call made reference to "very big numbers" from IDEXX's chief rival--a nod to Abaxis ($ABAX), which the previous evening announced blow-out results that included a 23% year-over-year increase in instrument placements--Ayers said he's not worried about the competition. The addition of technologies such as SDMA detection offers IDEXX an opportunity to serve "the 10,000 customers out there that do not have the real-time care, the advanced menu, the flexibility and the lower cost per test, let alone the connection into a full diagnostic solution," he said.

- here's the earnings release
- access the earnings call transcript here
- get more at the Associated Press

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