An Animal of a Quarter for IDEXX

For most companies, a headwind of 7 percentage points because of the stronger dollar would wipe out most -- if not all -- of their growth, butIDEXX Laboratories was still able to post a solid 6% year-over-year increase in revenue despite the currency changes.

IDEXX placed over 2,000 instruments in the second quarter -- over 1,100 Catalyst instruments and over 900 hematology instruments, producing a 38% year-over-year increase in revenue, although 16 percentage points of that was deferred revenue associated with pre-sales of its new Catalyst One instrument.

The placement of new instruments -- the company now expects that it can place "well over 9,000 chemistry and hematology instruments" this year -- bodes well for the sale of recurring instrument consumables in future quarters.

VetLab consumables are already growing nicely, up 19% year over year in the second quarter, thanks to increased placement of the instruments in previous quarters. Laboratory lab testing and consulting services increased 12%. The new kidney function test, SDMA, which is being included in all panels, and a new fecal antigen test should help drive lab testing in the future.

Organic revenue for tests on livestock, poultry, and dairy was down 1%, but the segment only makes up 7.8% of revenue, so it's not a major impediment to growth. IDEXX blamed lowerlivestock services revenue in Australia for the decline, but noted that China is on the upswing.

The only other downside came from IDEXX's rapid assay products, which increased just 3% as new competition continued to cut into the company's share of the market. It is hoping new head-to-head comparisons that show IDEXX's tests are more sensitive at detecting infectious diseases than its competitors' will help the product line start growing again. The recent switch from a distributor model to in-house sales people may end up helping IDEXX reaccelerate sales of the rapid assay products because it'll be easier to get its message across to veterinarians with an in-house salesforce.

A slightly better operating margin and a lower number of shares outstanding helped IDEXX grow earnings per share faster than revenue growth. Second-quarter earnings per share were up 9% year over year to $0.60 per share. If it weren't for the changes in currencies, IDEXX estimates that earnings-per-share growth would have grown 18%.

Looking aheadDespite the solid quarter, IDEXX maintained its guidance with 2015 adjusted earnings per share expected to be 4% to 6% higher than 2014. After lowering guidance last quarter, management may be acting conservatively to keep from sending investors on a seesaw.

Getting its rapid assay tests growing at a decent pace will help the company exceed guidance in the second half of the year, but IDEXX also has a nice foundation of machines that run other tests, which will drive future consumable sales regardless of whether the rapid assay tests reaccelerate or not.

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