Friday, October 24, before the markets opened, Idexx Laboratories (IDXX) reported very strong third-quarter results, with each key operating and financial metric registering above expectations. Adjusted earnings per share were up 23%, to $1.05, easily topping the $0.88 consensus forecast; excluding a lower-than-anticipated tax rate ($0.10 benefit), the company reported a clean seven-cent EPS beat. Sales registered at $384 million, up 11% year-over-year on a normalized basis (13% reported growth) and nicely above the $371.7 million consensus target, despite an emerging foreign-exchange headwind.
The company also deployed nearly $273 million on share repurchases during the quarter (2.198 million shares at an average price of $123.98), bringing year-to-date repurchases to 3.789 million shares for roughly $469 million—in our view showing strong confidence in the business outlook. Overall, management expects diluted shares outstanding to decline by 7.0% to 7.5% in fiscal 2015.
Lastly, the company increased guidance across the board for both 2014 and 2015 and lowered its guidance on the negative, transitory impact from the movement to an alldirect sales model. Put simply, it was a very strong quarter at Idexx, and the company is clearly firing on all cylinders, offering further conviction behind the move to an all-direct model. Further details from the third-quarter results and business outlook follow below. Detailed Discussion: Idexx reported another solid quarter, led by 13% reported growth in its core Companion Animal Group (CAG) operations. CAG sales were led by 12% normalized, organic growth in the core diagnostics recurring-revenue business, highlighted by 14% growth in reference labs and 15% growth in instrument consumables.
The company also had another very strong instrument placement quarter, with both Catalyst and hematology placements increasing 32% over the prior-year quarter; it also placed 3,200 SNAP Pro Mobile devices during the quarter, continuing the product’s record-breaking placement performance (with an installed base of 6,700 to date). Sales strength also was broad, with more than 11% adjusted organic U.S. CAG diagnostic growth and more than 15% growth in international markets.
While often neglected by investors, the company’s other two segments also demonstrated very strong performance during the quarter—with Livestock, Poultry, and Dairy (LPD) organic growth of 14% and Water growth of 9%. This performance helped drive total sales to $384 million, nicely ahead of the $371 million consensus forecast.