We recently compiled a list of the 10 Worst Performing Healthcare Stocks in 2024. In this article, we are going to take a look at where IDEXX Laboratories, Inc. (NASDAQ:IDXX) stands against the other healthcare stocks.
The Evolving Landscape of Global Healthcare Spending and Innovation
The healthcare industry remains a vital and resilient sector which is driven by advancements in technology, increasing global demand, and an aging population. ReportLinker projects that the healthcare services industry will grow from $7.5 trillion in 2022 to $7.975 trillion in 2023. It is anticipated to increase at a compound annual growth rate (CAGR) of 6.3%, or $9.8 trillion, through 2027. The global healthcare market is divided into several segments, including hospitals, digital health, and healthcare services. The hospital market alone is predicted to grow by 4.18% a year between 2024 and 2029, reaching a market value of $5.19 trillion.
In 2021, worldwide healthcare spending reached a record $9.8 trillion, or 10.3% of global GDP, according to a report released by the World Health Organization in December 2023. Spending was not uniformly dispersed, either, with low-income nations becoming more dependent on foreign help as government health spending declined. High-income nations spent about $4,000 per capita on health care, but 11% of the world’s population resided in nations that spent less than $50 per person. Even while public health spending increased during COVID-19, this trend is unlikely to continue because nations are dealing with issues like high inflation, weak growth, and mounting debt.
According to the Centers for Medicare and Medicaid Services (CMS), national healthcare spending is projected to reach an estimated $4.8 trillion in 2023 and grow at an annual rate of 5.6% between 2027 and 2032.
A patient-centered, technology-driven revolution is taking place in the healthcare industry. Thanks to the epidemic, telehealth has become widely accepted; in 2023, the global market was estimated to be worth $60.15 billion and is predicted to continue growing. By 2028, the genomics-driven precision medicine market, which provides individualized therapies based on genetic composition, is expected to reach $50.2 billion. With $31.5 billion in equity funding from 2019 to 2022 and the potential for $360 billion in annual US savings over the next five years, AI is also revolutionizing healthcare. The global market for remote patient monitoring (RPM), which was valued at $71.9 billion in 2023, is expected to continue expanding thanks to wearable technology.
Dr Bruce Aylward, WHO Assistant Director-General, Universal Health Coverage, Life Course, said:
“Sustained public financing on health is urgently needed to progress towards universal health coverage. It is especially critical at this time when the world is confronted by the climate crisis, conflicts, and other complex emergencies. People’s health and well-being need to be protected by resilient health systems that can also withstand these shocks.”
The Looming Collapse of U.S. Healthcare
The most concerning aspect of the healthcare industry is the looming collapse of the U.S. healthcare system, particularly in terms of workforce shortages and financial instability. The healthcare industry is facing a severe staffing crisis. By 2030, it is projected that 124,000 more physicians will be needed, and 800,000 registered nurses (RNs) are anticipated to leave the profession by 2027. The current turnover rate for staff RNs is a staggering 24%. This shortage has led to the closure of vital patient services, including Pediatrics, Psychiatry, Obstetrics, and ICUs in some healthcare systems.
Despite these challenges, the U.S. continues to spend nearly twice as much on healthcare as the OECD average, with worse outcomes on average. This disparity highlights the inefficiency and unsustainability of the current system. Additionally, 58% of hospital bad debt comes from insured patients, further straining the revenue cycle and limiting funds available for clinical services. The combination of these factors paints a grim picture of the U.S. healthcare system’s future. Without significant intervention and reform, the industry risks a systemic collapse that could have far-reaching consequences for public health and the economy.
Our Methodology
In our methodology, we used a stock screener to pick stocks with a market capitalization above $10 billion and assessed their year-to-date (YTD) returns. We subsequently identified those with underwhelming YTD performance as of November 11 and ranked them accordingly.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A veterinarian in a veterinary clinic examining a companion animal.
IDEXX Laboratories, Inc. (NASDAQ:IDXX)
Total YTD Return: -17.12%
IDEXX Laboratories, Inc. (NASDAQ:IDXX) is a global leader in veterinary diagnostics and water microbiology testing. The company specializes in developing and manufacturing products for pet healthcare, livestock and poultry diagnostics, and water quality testing. Its core business includes providing diagnostic tests, imaging systems, and practice management software to veterinary clinics and animal hospitals, as well as health tests for livestock and poultry and solutions for water safety testing. IDXX is down by over 17% since the start of 2024, which makes it one of the worst performing healthcare stocks.
In Q3 2024, IDEXX Laboratories, Inc. (NASDAQ:IDXX) reported a 6% organic revenue growth, with notable contributions from its Companion Animal Group (CAG) diagnostics, which grew by 7%, and its water business, which saw a 13% growth. However, this growth was overshadowed by a 2% decline in its Livestock, Poultry, and Dairy (LPD) segment and overall pressures from the U.S. macroeconomic environment that constrained clinical visits to veterinary practices. The company had to revise its full-year organic revenue growth outlook down to 5.3% from 6%, reflecting a reduction of 1% to 1.5% compared to previous forecasts due to these external pressures.
Analysts have expressed caution regarding the corporation’s future performance, with several lowering their price targets significantly. For instance, JPMorgan reduced its target from $630 to $575, while Barclays set a new target of $481, reflecting a bearish sentiment towards the stock.
Baron Partners Fund stated the following regarding IDEXX Laboratories, Inc. (NASDAQ:IDXX) in its Q2 2024 investor letter:
“Shares of veterinary diagnostics leader IDEXX Laboratories, Inc. (NASDAQ:IDXX) detracted from performance. Foot traffic to veterinary clinics in the U.S. remains uneven, which will modestly hamper aggregate revenue growth. Despite this, IDEXX’s excellent execution has enabled the company to continue to deliver robust financial results. We believe IDEXX’s competitive trends are outstanding, and we expect new proprietary innovations and field sales force expansion to be meaningful contributors to growth in 2024. We see increasing evidence that long-term secular trends around pet ownership and pet care spending have been structurally accelerated, which should help support IDEXX’s long-term growth rate.”
As tracked by the Insider Monkey database, 42 hedge fund holders held shares in IDEXX Laboratories, Inc. (NASDAQ:IDXX) in Q3 2024, with Fundsmith LLP being the largest stakeholder with shares worth $1.3 billion. Street analysts hold a consensus Moderate Buy rating on the stock.
Overall IDXX ranks 10th on our list of the worst performing healthcare stocks in 2024. While we acknowledge the potential of IDXX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IDXX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
