IDEXX Laboratories, a leading pet diagnostics company, raised its full-year outlook after beating quarterly earnings estimates, even as the number of vet visits in the US continued to decline. The company said US same-store vet visits fell about 1.8% in the third quarter, yet it still managed to grow its core diagnostics business—a sign that the industry's post-pandemic slowdown isn't hitting every supplier equally.
Why vet visits are down
During the pandemic, pet adoptions surged, and clinics were busier than ever. But that boom has cooled. Many owners are now tightening their budgets, and discretionary spending on pets—including routine check-ups—has softened. For animal-health companies like IDEXX, fewer appointments usually mean less revenue. But IDEXX is leaning on a different strategy: getting clinics to run more tests per visit, more often, on the animals that do come in.
The company said that trend—helped by newer tools like its InVue Dx analyzer and CancerDx cancer-screening test for dogs—lifted recurring diagnostics revenue in its US companion-animal business by 9.6% despite softer traffic. That's a notable divergence from the broader clinic sales picture.
The mechanics behind the growth
William Blair, an analyst firm, noted that IDEXX's recurring companion-animal diagnostics growth is still running well ahead of overall clinic sales growth. That suggests the company is taking market share or expanding its “tests per appointment” footprint rather than waiting for visits to rebound.
The key isn't just that IDEXX grew through weaker clinic traffic—it's the mechanics. If a company can raise “diagnostic use per visit” (basically, how many tests get run each appointment), it can offset a small decline in visit volume by increasing revenue per visit. That gets more durable when growth is tied to an installed base of in-clinic machines. Once a practice builds its workflow around platforms like InVue Dx, the follow-on revenue tends to come from repeat purchases of test consumables, not occasional equipment sales.
This is a familiar pattern in the diagnostics industry. Companies that place instruments in clinics or hospitals often see a steady stream of recurring revenue from the consumables used in those machines. It's a business model that can smooth out the ups and downs of end-market demand.
What it means for investors
For investors, the debate shifts from “when do vet visits recover?” to “can IDEXX keep lifting attach rates and placements?” That's a more controllable variable, and it can support steadier expectations for its US companion-animal diagnostics business in a softer demand backdrop.
IDEXX's raised outlook suggests management is confident that the trend of more tests per visit can continue, even if the overall number of appointments stays weak. That's a positive signal for shareholders, but it also raises the bar for future quarters. If the company can keep growing diagnostics revenue in the high single digits while visits decline, it may be able to sustain its premium valuation.
Still, investors should keep an eye on the broader environment. If pet owners cut back further, or if clinics start to push back on the number of tests they run, IDEXX's growth could slow. The company's ability to innovate—like with CancerDx, which screens dogs for cancer—will be key to maintaining momentum.
For everyday investors, the takeaway is that IDEXX is showing how a company can grow even when its end market is soft, by focusing on the value it delivers per customer interaction. That's a lesson that applies beyond pet care.
In other earnings news, Flutter's FanDuel growth strategy is testing investor patience ahead of its Q3 report, while Marriott's luxury resorts are driving international growth. On the macro front, US factory growth accelerated in October despite sticky input costs, and German factory growth masks a widening profit squeeze.
