Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp reported fourth-quarter 2022 adjusted earnings per share (EPS) of $4.14, down 38.8% from the year-ago quarter’s figure. The adjusted figure excludes the impact of certain amortization expenses, restructuring charges, acquisition and disposition-related costs, gain on the sale of business and loss from venture fund investments, among others. The bottom line exceeded the Zacks Consensus Estimate by 1.9%.
On a GAAP basis, net earnings for the fourth quarter were 86 cents per share, significantly down from the year-ago figure of $5.75.
Full-year adjusted EPS was $19.94, a 30.1% plunge from the end of 2021. The metric, however, beat the Zacks Consensus Estimate by 0.6%.
Revenues
Revenues in the quarter under review fell 9.4% year over year to $3.67 billion and missed the Zacks Consensus Estimate by 2.1%.
The decline in revenues can be attributed to a 9.4% fall in organic revenues and a 1.3% negative impact from foreign currency translation. However, the downside was partially offset by 1.3% growth from acquisitions net of divestitures. The decline in organic revenues was due to a 13.4% fall in contribution from COVID-19 PCR and antibody testing (COVID-19 testing). However, this decline in COVID-19 Testing was partially offset by a 3.9% rise in the company's organic Base Business (business operation excluding the company’s COVID-19 testing).
Full-year revenues were $14.88 billion, reflecting a 7.7% decline from the comparable 2021 period. The metric missed the Zacks Consensus Estimate by 0.5%.
Segments in Detail
For the fourth quarter, LabCorp Diagnostics reported revenues of $2.29 billion, reflecting a 12.8% fall year over year. On an organic basis, revenues were down 14.3%, partially offset by acquisitions growth of 1.7%. This decline in organic revenues resulted from a 20.7% drop in contribution from COVID-19 Testing, partially offset by a 6.4% rise in Base Business. There was a 0.3% negative impact from foreign currency translation.
The company witnessed an 11.8% fall in total volume (measured by requisition) on a 13.8% decline in organic volume and acquisition volume growth of 2%. Organic volume was primarily hampered by a 14.3% drop in COVID-19 Testing, partially offset by a 0.5% rise in Base Business.
Drug Development revenues fell 4.1% to $1.39 billion in the fourth quarter due to a 3.1% negative impact from foreign currency translation. There was 0.4% growth from acquisitions, offset by a 1.5% drop in organic Base Business revenues. There has been a 5% decline due to COVID-related work and the Ukraine/Russia crisis.
Margins
Gross margin contracted 750 basis points (bps) to 26.4% in the fourth quarter. Adjusted operating income declined 47.9% year over year to $433.3 million. Adjusted operating margin contracted 870 bps from the year-ago quarter to 11.8%.
Cash Position
LabCorp exited the fourth quarter of 2022 with cash and cash equivalents of $430 million compared with $1.47 billion at the end of 2021. Cumulative cash flow from operating activities at the end of the fourth quarter was $1.96 billion, significantly down from $3.11 billion a year ago. Additionally, cumulative free cash flow at the end of the quarter under review was $1.50 billion, down from $2.60 billion a year ago.
At the end of fourth-quarter 2022, LabCorp repurchased $300.0 million of stock, representing approximately 1.4 million shares. The company’s board of directors approved an additional $1.0 billion share repurchase authorization.
2023 View
The company provided its 2023 guidance.
Total LabCorp Enterprise revenues (net of intersegment transaction eliminations, including Drug Development COVID-19 testing revenues) are expected to grow in the range of 1-4%. Base Business growth is expected in the range of 8.5-10.5%. Meanwhile, COVID-19 testing revenues are expected to decline in the range of 75-90%.
Total Diagnostics revenues are expected to be down 2% to up 1.5%. Total Drug Development revenues are expected to rise in the range of 5-7% in 2023.
The Zacks Consensus Estimate for full-year revenues is pegged at $14.96 billion.
The company expects full-year adjusted EPS in the band of $16.00-$18.00. The Zacks Consensus Estimate for the metric is pegged at $17.67.
The company projects 2023 free cash flow figure in the range of $1-$1.2 billion.
Our Take
LabCorp ended the fourth quarter of 2022 with better-than-expected earnings but a revenue miss. On a year-over-year basis, Q4 revenues and adjusted EPS declined significantly. Organic revenues declined mainly due to a major decrease in COVID-19 PCR and antibody testing sales. Significant contraction of both margins is discouraging. The severe foreign exchange headwind, inflationary pressure and the ongoing Ukraine/Russia crisis continue to impact business performance.
Meanwhile, the company is accelerating the planned spin-off of its Clinical Development business (announced in July) and expects it to be completed in mid-2023.
Zacks Rank and Key Picks
LabCorp currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, currently carrying a Zacks Rank #2, reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, with a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. The company currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp reported fourth-quarter 2022 adjusted earnings per share (EPS) of $4.14, down 38.8% from the year-ago quarter’s figure. The adjusted figure excludes the impact of certain amortization expenses, restructuring charges, acquisition and disposition-related costs, gain on the sale of business and loss from venture fund investments, among others. The bottom line exceeded the Zacks Consensus Estimate by 1.9%.
On a GAAP basis, net earnings for the fourth quarter were 86 cents per share, significantly down from the year-ago figure of $5.75.
Full-year adjusted EPS was $19.94, a 30.1% plunge from the end of 2021. The metric, however, beat the Zacks Consensus Estimate by 0.6%.
Revenues
Revenues in the quarter under review fell 9.4% year over year to $3.67 billion and missed the Zacks Consensus Estimate by 2.1%.
The decline in revenues can be attributed to a 9.4% fall in organic revenues and a 1.3% negative impact from foreign currency translation. However, the downside was partially offset by 1.3% growth from acquisitions net of divestitures. The decline in organic revenues was due to a 13.4% fall in contribution from COVID-19 PCR and antibody testing (COVID-19 testing). However, this decline in COVID-19 Testing was partially offset by a 3.9% rise in the company's organic Base Business (business operation excluding the company’s COVID-19 testing).
Full-year revenues were $14.88 billion, reflecting a 7.7% decline from the comparable 2021 period. The metric missed the Zacks Consensus Estimate by 0.5%.
Segments in Detail
For the fourth quarter, LabCorp Diagnostics reported revenues of $2.29 billion, reflecting a 12.8% fall year over year. On an organic basis, revenues were down 14.3%, partially offset by acquisitions growth of 1.7%. This decline in organic revenues resulted from a 20.7% drop in contribution from COVID-19 Testing, partially offset by a 6.4% rise in Base Business. There was a 0.3% negative impact from foreign currency translation.
The company witnessed an 11.8% fall in total volume (measured by requisition) on a 13.8% decline in organic volume and acquisition volume growth of 2%. Organic volume was primarily hampered by a 14.3% drop in COVID-19 Testing, partially offset by a 0.5% rise in Base Business.
Drug Development revenues fell 4.1% to $1.39 billion in the fourth quarter due to a 3.1% negative impact from foreign currency translation. There was 0.4% growth from acquisitions, offset by a 1.5% drop in organic Base Business revenues. There has been a 5% decline due to COVID-related work and the Ukraine/Russia crisis.
Margins
Gross margin contracted 750 basis points (bps) to 26.4% in the fourth quarter. Adjusted operating income declined 47.9% year over year to $433.3 million. Adjusted operating margin contracted 870 bps from the year-ago quarter to 11.8%.
Cash Position
LabCorp exited the fourth quarter of 2022 with cash and cash equivalents of $430 million compared with $1.47 billion at the end of 2021. Cumulative cash flow from operating activities at the end of the fourth quarter was $1.96 billion, significantly down from $3.11 billion a year ago. Additionally, cumulative free cash flow at the end of the quarter under review was $1.50 billion, down from $2.60 billion a year ago.
At the end of fourth-quarter 2022, LabCorp repurchased $300.0 million of stock, representing approximately 1.4 million shares. The company’s board of directors approved an additional $1.0 billion share repurchase authorization.
2023 View
The company provided its 2023 guidance.
Total LabCorp Enterprise revenues (net of intersegment transaction eliminations, including Drug Development COVID-19 testing revenues) are expected to grow in the range of 1-4%. Base Business growth is expected in the range of 8.5-10.5%. Meanwhile, COVID-19 testing revenues are expected to decline in the range of 75-90%.
Total Diagnostics revenues are expected to be down 2% to up 1.5%. Total Drug Development revenues are expected to rise in the range of 5-7% in 2023.
The Zacks Consensus Estimate for full-year revenues is pegged at $14.96 billion.
The company expects full-year adjusted EPS in the band of $16.00-$18.00. The Zacks Consensus Estimate for the metric is pegged at $17.67.
The company projects 2023 free cash flow figure in the range of $1-$1.2 billion.
Our Take
LabCorp ended the fourth quarter of 2022 with better-than-expected earnings but a revenue miss. On a year-over-year basis, Q4 revenues and adjusted EPS declined significantly. Organic revenues declined mainly due to a major decrease in COVID-19 PCR and antibody testing sales. Significant contraction of both margins is discouraging. The severe foreign exchange headwind, inflationary pressure and the ongoing Ukraine/Russia crisis continue to impact business performance.
Meanwhile, the company is accelerating the planned spin-off of its Clinical Development business (announced in July) and expects it to be completed in mid-2023.
Zacks Rank and Key Picks
LabCorp currently has a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Cardinal Health, Inc. (CAH - Free Report) , McKesson Corporation (MCK - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Cardinal Health, currently carrying a Zacks Rank #2, reported second-quarter fiscal 2023 adjusted EPS of $1.32, beating the Zacks Consensus Estimate by 16.8%. Revenues of $51.47 billion outpaced the consensus mark by 2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health has a long-term estimated growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 6.4%.
McKesson, with a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. The company currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.
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