IDXX
now at $132
Target Price $148
Life Sciences — Biomedical Devices and Services
RAISING ESTIMATES ON CATALYST ONE
PULL-THROUGH; UPGRADE TO BUY, RAISE
PRICE TARGET TO $148
Investment recommendation
We upgrade IDEXX Laboratories to BUY from Hold and raise our PT to
$148 from $116. We believe the rollout of Catalyst One in Q4/14 will
enable IDEXX to capture share in the lower-volume vet market and
accelerate 2015 revenue growth to 9%. We believe IDXX can achieve
double-digit organic revenue growth by 2016 driven by increased
penetration and conversion to Catalyst Dx, increased cross-selling in the
US from its revamped sales force, and significant global expansion.
Investment highlights
Catalyst One is another growth driver. We raise our 2015 revenue
estimate by $30M to $1,635M (+9%) vs. consensus of $1,616M and
raise our 2015 EPS estimate to $4.38 (+14%) from $4.32. We
believe IDXX’s roll-out of Catalyst One (a scaled-down version of the
Catalyst Dx instrument) in Q4/14 will help accelerate consumable
reagent growth to 13% in 2015 and 14%+ in 2016.
Introducing 2016 estimates. We introduce our 2016 EPS estimate of
$5.00, which assumes accelerating EPS growth of 14%+ on
revenues of $1,800M (+10%), consistent with IDXX’s goal of
achieving double-digit organic revenue growth.
Balanced organic growth. We believe IDXX has solid visibility for
organic growth (8.8% average in the last three quarters) both within
the US (upgrade customers, modest share gains, new product revs)
and OUS. We believe global expansion in the EU, Brazil and Asia
represent major LT growth drivers, as countries outside the US
begin to approach levels of sophistication practiced by US Vets.
