IDEXX raises 2026 earnings outlook but trims its margin forecast

IDEXX Laboratories runs three segments: the Companion Animal Group, water quality products, and livestock, poultry and dairy testing.¹ The pet business is by far the largest, bringing in $1,116.0 million of the third quarter's $1,214.2 million of revenue.² Recurring diagnostic sales made up about 79% of 2025 revenue, and tests that clinics send out run through about 80 IDEXX reference laboratories. The company employs about 11,000 people and is in the S&P 500.³ In 2025 it had revenue of $4,303.7 million and an operating margin, meaning operating profit as a share of revenue, of 31.6%.⁴

The business depends on pet owners bringing animals to the vet. In the United States, same-store clinical visits at veterinary practices fell about 2% in 2025, yet diagnostics revenue per practice grew about 6%.¹ IDEXX's North American rivals include Mars, Incorporated's Antech Diagnostics and Heska, and IDEXX expects competition from both existing rivals and new entrants to increase.² In August, Zoetis, which sells into the same pet market, cut its annual forecasts after missing revenue estimates, and its chief executive pointed to lower clinic visits.³

IDEXX has raised its 2026 EPS outlook at each report since its first 2026 range in February, though this time it lowered its operating margin outlook. In February it projected 2026 EPS of $14.29 to $14.80 and 40 to 90 basis points of operating margin improvement.¹ It raised full-year EPS guidance to $14.45 to $14.90 in May and to $14.69 to $14.94 in August.² A year ago, the update that came with third-quarter results put full-year 2025 EPS at $12.81 to $13.01, and the full year came in at $13.08.³

In mid-September IDEXX bought CoVet, a provider of AI ambient listening and clinical workflow software for veterinary practices, and did not disclose the price. CoVet says tens of thousands of users rely on it across North America, Europe, Australia and New Zealand.¹ Mike Erickson is president and chief executive.²

In our price file, IDXX closed at $510.815 on September 15 and at $575.97 on October 29. It then closed at $551.48 on October 30, a day the S&P 500 fund SPY went from $769.49 to $755.72.¹ IDEXX had said it would release results before the market opened on Monday, November 2.²

IDEXX reported results for the quarter ended September 30, 2026 in an 8-K. Third-quarter revenue rose 10% to $1,214 million, both as reported and on an organic basis, which strips out currency, certain acquisitions and divestitures.¹ Recurring diagnostic revenue in the pet business grew 11%, with 10% growth in the U.S. and 14% organic growth abroad. Sales of IDEXX VetLab consumables grew 14% as reported and 15% organically.² IDEXX placed over 1,900 inVue Dx analyzers in the quarter, bringing that base to nearly 11,000, and its premium instrument base grew 11%. Instrument revenue itself was flat, and rapid assay revenue rose only 1% as price increases offset lower testing volumes.³

Gross margin rose 110 basis points to 62.9%, and operating expenses grew 10%. The operating margin rose 100 basis points to 33.1%, or 60 basis points on a comparable basis, and currency added 40 basis points.¹ General and administrative costs rose about 16%, faster than sales, and the release says expenses absorbed acquisition costs, including transaction costs.² Diluted EPS rose 18% to $4.01 from $3.40. That figure included a $0.03 gain on an equity investment, a $0.04 currency benefit and a $0.01 tax benefit from stock pay.³ IDEXX's own comparable EPS, a non-GAAP figure, rose 22% to $3.96 from $3.24. Through September, year-to-date EPS was $11.75, up 18%, and the year-to-date operating margin was 33.3%, up from 32.5%.⁴

The 2026 revenue outlook rose to $4,741 million to $4,767 million, from $4,700 million to $4,745 million, up $32 million at the midpoint, and $5 million of that comes from CoVet.¹ The EPS outlook rose to $14.96 to $15.16 from $14.69 to $14.94. The operating margin outlook fell to 32.1% to 32.3% from 32.3% to 32.5%, which now means 50 to 70 basis points of expansion over 2025.² The company says the EPS raise was led by the higher revenue outlook while supporting acquisition costs, and that the updated guidance includes acquisition impacts.³ The same release says acquisitions will have an immaterial impact on 2026 revenue growth, which fits: $5 million is about 0.1% of the new revenue range.⁴

This is the heart of the question. At the midpoints, the old outlook implies about $1.53 billion of 2026 operating profit and the new one about $1.53 billion too, a change of under $1 million.¹ So the extra revenue is offset by the lower margin, and other lines did the work. The expected tax rate fell to about 20.5% from about 21.1%, and net interest expense to about $32 million from about $35 million.² Using about $1.5 billion of pre-tax profit and 79.0 million diluted shares, we estimate the tax change is worth about $0.11 a share and the interest change about $0.03, or about $0.14 together. The expected cut in the average share count also widened to about 2% from 1.5% to 2%.³ Those gains are real for shareholders, but they come from below the operating line. In August, the 10-Q also warned that smaller stock-pay tax benefits are expected to raise future tax rates.⁴

Because most of the year is already reported, the full-year range also sets up the fourth quarter. Nine-month revenue was about $3.57 billion, and nine-month operating profit was about $1.19 billion.¹ Taking those out of the full-year range leaves fourth-quarter revenue of about $1,169 million to $1,195 million and a fourth-quarter operating margin of about 28.3% to 29.2%. That compares with a 28.9% margin in the fourth quarter of 2025, so the outlook calls for a fourth-quarter margin roughly flat with last year.² Fourth-quarter revenue a year earlier was about $1,090.6 million, the 2025 total less the nine-month figure.³ So implied fourth-quarter revenue growth is about 7.2% to 9.61%.⁴ Subtracting nine-month EPS of $11.75 gives fourth-quarter EPS of roughly $3.21 to $3.41, against $3.08 a year earlier, or growth of about 4.2% to 10.7%. Full-year EPS is not exactly the sum of the quarters, so these are approximations.⁵ Currency explains part of the slowdown. IDEXX expects currency to add about $0.25 to 2026 EPS, with $0.20 in the first half and $0.04 in the third quarter, leaving little for the fourth quarter against a $0.09 currency gain a year earlier, when the quarter also had a $0.07 stock-pay tax benefit.⁶

Cash backs the earnings. Third-quarter free cash flow, operating cash flow minus capital spending, was $420.8 million, above net income of $317.1 million.¹ Over the past year to September 30, operating cash flow of about $1,419 million less about $115 million of capital spending gave about $1.3 billion of free cash flow, about 110% of net income of about $1,182 million.² The outlook now expects free cash flow of 95% to 100% of 2026 net income, up from 90% to 100%, and capital spending of about $160 million instead of about $180 million.³

Through September, IDEXX spent $810.0 million buying back stock and $227.1 million on acquisitions, about $1.04 billion in all, more than its $977.6 million of nine-month free cash flow. It borrowed a net $76.0 million under its credit facility and repaid $75.0 million of senior notes.¹ About $222.6 million of the acquisition spending came in the third quarter, since the first half's was $4.5 million, and the release does not say how much was CoVet.² Buybacks slowed at the same time: IDEXX bought about 199,000 shares in the third quarter, against about 411,000 a year earlier, spending $111.8 million at an average of $563.04. What holders get in return is a smaller share count, with diluted shares averaging 79.0 million in the quarter, down from 80.7 million.³

Debt stays modest. At September 30, IDEXX owed $474.0 million on its credit line, $75.0 million of notes due within a year and $299.9 million of longer-term notes, about $849 million in all, against $197.5 million of cash.¹ That is net debt of about $651 million, or about 0.4 times the $1,685.9 million of trailing adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, with adjustments) shown in the 10-Q at June 30. The credit facility caps leverage at 3.5 to 1, and IDEXX was in compliance at June 30, with $729.2 million still available to borrow.² The next note maturity is $75.0 million due February 12, 2027. In the second quarter, operating income of $425.6 million covered $10.2 million of interest expense about 42 times.³ Most cash sits abroad: at June 30, $169.4 million of $196.9 million was held outside the U.S. IDEXX pays no dividend.⁴

Dilution risk is small. IDEXX had 78,781,116 shares outstanding on July 31, and 1.116 million stock options were outstanding at the end of 2025 at an average exercise price of $354.19.¹ The board had 2,552,570 shares left under its buyback authorization at June 30. Vanguard Portfolio Management reported a passive 5.04% stake as of September 30 and certified that it does not seek to influence control.² Director Lawrence Kingsley exercised options and sold 2,203 shares at about $532.08 in September, keeping 9,568 shares.³

The release came before the market opened on November 2, so the stock has not had a regular session to react; its last close before the filing was $551.48 on October 30.¹ At that price IDEXX was worth about $43.4 billion, or about 37 times the new EPS midpoint. Trailing free cash flow of about $1.3 billion is a yield of about 3% on that value.²

The company's own goals, which are targets and not results, are 2026 organic revenue growth of 9.3% to 10.0%, recurring diagnostic growth of 11.0% to 11.7% as reported, and reported EPS growth of 14% to 16%.¹ It will also show its next in-clinic analyzer, MultiCue Dx, to investors at the VMX conference on Monday, January 18, 2027.²

The bull case: demand for IDEXX tests keeps growing, with 11% recurring growth in the quarter and 14% organic growth abroad.¹ Bulls see nearly 11,000 inVue Dx analyzers and a new analyzer on the way as future demand for test supplies. IDEXX has raised its EPS guidance at each report since February's initial range and beat the top of its full-year range last year, so the new range may prove cautious.² Strong free cash flow also pays for buybacks that cut the average share count by about 2% this year.³

The bear case, strongest point first: after absorbing acquisition costs, the raise does not reach operating profit, since midpoint operating profit is flat while tax and interest supply about $0.14, though the company raised organic growth 0.6% at midpoint and says the margin cut reflects acquisition impacts.¹ Second, the implied fourth quarter slows to about 7.2% to 9.61% revenue growth and roughly 4.2% to 10.7% EPS growth, from 10% and 18% in the third quarter.² Third, the tax help may not last, since the 10-Q expects smaller stock-pay tax benefits to push tax rates up. Fourth, volumes are soft in places, with rapid assay testing volumes down and instrument revenue flat, and CoVet still has to be integrated.³ Fifth, at about 37 times the EPS midpoint, the stock leaves little room for a miss.⁴ And vet traffic remains a swing factor: U.S. same-store clinical visits fell about 2% in 2025 and IDEXX's February outlook assumed a similar decline, but in May it said visit pressures had eased modestly and based its outlook on modestly improving visit trends, while Zoetis in August still blamed lower clinic visits.⁵

Our call is that 2026 diluted EPS ends above the midpoint of the new $14.96 to $15.16 range.¹ That needs fourth-quarter EPS of roughly $3.31 or more, about 7.5% above last year's $3.08, though that $3.08 included $0.16 of currency and stock-pay tax benefits the new guidance leaves little room to repeat.² The call would be wrong if the fourth-quarter margin lands near the bottom of the implied 28.3% to 29.2% band,³ or if the tax rate climbs back above the roughly 20.5% the outlook now assumes.⁴ We will know early in 2027, when IDEXX reports full-year results and files its annual report. Sooner, today's 8:30 a.m. call may give detail on CoVet's costs.⁵

IDEXX did not disclose CoVet's price, and CoVet gives only a user count, with no revenue or profit figures. The cash flow statement shows $227.1 million spent on acquisitions through September but does not name the deals.

The release lowers the margin outlook and says guidance includes acquisition impacts, but it does not split the cut between CoVet and other costs.

The call was set for 8:30 a.m. today, and no transcript was available to us, so analyst questions and management's answers on CoVet costs and fourth-quarter trends are not covered here.

We have no analyst consensus figure for the quarter or the year, so we cannot say whether results beat or missed forecasts.

Our price file starts in mid-September 2026, so we cannot confirm the stock's high or low over the past year.