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Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp reported fourth-quarter 2020 adjusted earnings per share (EPS) of $10.56, a significant rise from the year-ago quarter figure of $2.86. The adjusted figure excludes the impact of loss from venture fund investment, sale of business and debt refinancing costs among others. The bottom line surpassed the Zacks Consensus Estimate by 31.2%.
On a reported basis, net earnings were $9.54 per share, compared with the year-ago figure of $2.32 per share.
Full-year adjusted EPS was $23.94, a 111.5% surge from the year-ago period. This also surpassed the Zacks Consensus Estimate by 11.6%.
Revenues in the quarter under review increased 52% year over year to $4.49 billion. It exceeded the Zacks Consensus Estimate by 12.8%.
The company reported total revenues of $13.98 billion in 2020, a 21% rise from 2019. It also surpassed the Zacks Consensus Estimate by 3.4%.
Quarter in Detail
The increase in revenues can be attributed to 50.1% growth in organic revenues, 0.9% growth from acquisitions and 1% contribution from favorable foreign currency translation. The organic revenue growth comprises 46.4% contribution from COVID-19 testing and 3.7% rise in the company's organic Base Business (business operation excluding the company’s PCR and antibodyCOVID-19 testing). However, this increase in organic Base Business was offset by a 0.6% adverse impact of lower Medicare and Medicaid pricing as a result of implementation of Protecting Access to Medicare Act (PAMA).
Laboratory Corporation of America Holdings Price, Consensus and EPS Surprise
LabCorp reports results under two operating segments — LabCorp Diagnostics and Covance Drug Development.
In the fourth quarter, LabCorp Diagnostics reported revenues of $3.15 billion, reflecting 79.5% rise year over year. On an organic basis, revenues were up 78.5%. This included a 78% contribution from COVID-19 testing and 0.5% rise in Base Business. The Base Business includes a 1% negative impact from PAMA. Acquisition-related growth was 0.9% in the quarter while favorable foreign currency translation was 0.1%.
The company witnessed a 33.9% rise in total volume (measured by requisition). Organic volume improved 33.3%. Acquisition volume growth was 0.6%. Organic volume growth was primarily based on a 41% contribution from growing demand for COVID-19 testing, partially offset by 7.7% reduction in Base Business due to the pandemic.
Covance Drug Development revenues grew 16.4% to $1.40 billion in the fourth quarter on organic growth of 13.1%, acquisitions growth of 0.9% and favorable foreign currency translation of 2.3%. The organic growth includedan 8.4% increase in the Base Business and a 4.7% contribution from COVID-19 testing performed through its Central Laboratories business.
Margins
Gross margin expanded 1464 basis points (bps) to 42.4% in the fourth quarter. Also, adjusted operating income improved 240.9% year over year to $1.39 billion. Adjusted operating margin expanded 1712 bps from the year-ago quarter to 30.9%.
Cash Position
LabCorp exited 2020 with cash and cash equivalents of $1.32 billion compared with $337.5 million at the end of 2019. Cumulative cash flow from operating activities at the end of the year was $1,360.7 million, up from $874.9 million a year ago. Additionally, cumulative free cash flow at the end of the fourth quarter was $774.6 million, up from $569.8 million a year ago.
At the end of 2020, the company had $800 million of authorization remaining under its share repurchase program.
2021 View
The company provided its 2021 guidance. Total Labcorp Enterprise revenues are expected to be down 1% to up 4.5%. This includes Base Business growth in the range of 11% to 13.5% and COVID-19 testing revenue decline in the range of 35% to 50%.
Total Diagnostics revenues are expected to down 0.5% to 7.5%. Total Drug Development revenues are expected to rise 8% to 10.5% from 2020.
Our Take
LabCorp exited the fourth quarter of 2020 with better-than-expected earnings and revenues. These figures improved on a year-over-year basis as well.
Diagnostics revenues in the quarter were significantly high on organic volume improvements as a result of growing demand for COVID-19 testing. Although there were still negative impacts of COVID-19 on organic Base Business volume, this part of the business is recovering fast.
Also, Covance Drug Development delivered higher sales.
However, the company’s 2021 guidance projects significant sinking of COVID-19 related testing revenues.
Zacks Rank
LabCorp currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have already announced quarterly results are Hologic, Inc. (HOLX - Free Report) , Abbott Laboratories (ABT - Free Report) and AngioDynamics, Inc. (ANGO - Free Report) . While Hologic sports a Zacks Rank of 1 (Strong Buy), both Abbott and AngioDynamics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, which surpassed the Zacks Consensus Estimate by 33.6%.
Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Further, fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%.
AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny. The Zacks Consensus Estimate was of a loss per share of 2 cents. Additionally, revenues of $72.8 million beat the consensus mark by 8%.
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LabCorp (LH) Q4 Earnings Beat Estimates, Margins Expand
Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp reported fourth-quarter 2020 adjusted earnings per share (EPS) of $10.56, a significant rise from the year-ago quarter figure of $2.86. The adjusted figure excludes the impact of loss from venture fund investment, sale of business and debt refinancing costs among others. The bottom line surpassed the Zacks Consensus Estimate by 31.2%.
On a reported basis, net earnings were $9.54 per share, compared with the year-ago figure of $2.32 per share.
Full-year adjusted EPS was $23.94, a 111.5% surge from the year-ago period. This also surpassed the Zacks Consensus Estimate by 11.6%.
Revenues in the quarter under review increased 52% year over year to $4.49 billion. It exceeded the Zacks Consensus Estimate by 12.8%.
The company reported total revenues of $13.98 billion in 2020, a 21% rise from 2019. It also surpassed the Zacks Consensus Estimate by 3.4%.
Quarter in Detail
The increase in revenues can be attributed to 50.1% growth in organic revenues, 0.9% growth from acquisitions and 1% contribution from favorable foreign currency translation. The organic revenue growth comprises 46.4% contribution from COVID-19 testing and 3.7% rise in the company's organic Base Business (business operation excluding the company’s PCR and antibodyCOVID-19 testing). However, this increase in organic Base Business was offset by a 0.6% adverse impact of lower Medicare and Medicaid pricing as a result of implementation of Protecting Access to Medicare Act (PAMA).
Laboratory Corporation of America Holdings Price, Consensus and EPS Surprise
Laboratory Corporation of America Holdings price-consensus-eps-surprise-chart | Laboratory Corporation of America Holdings Quote
LabCorp reports results under two operating segments — LabCorp Diagnostics and Covance Drug Development.
In the fourth quarter, LabCorp Diagnostics reported revenues of $3.15 billion, reflecting 79.5% rise year over year. On an organic basis, revenues were up 78.5%. This included a 78% contribution from COVID-19 testing and 0.5% rise in Base Business. The Base Business includes a 1% negative impact from PAMA. Acquisition-related growth was 0.9% in the quarter while favorable foreign currency translation was 0.1%.
The company witnessed a 33.9% rise in total volume (measured by requisition). Organic volume improved 33.3%. Acquisition volume growth was 0.6%. Organic volume growth was primarily based on a 41% contribution from growing demand for COVID-19 testing, partially offset by 7.7% reduction in Base Business due to the pandemic.
Covance Drug Development revenues grew 16.4% to $1.40 billion in the fourth quarter on organic growth of 13.1%, acquisitions growth of 0.9% and favorable foreign currency translation of 2.3%. The organic growth includedan 8.4% increase in the Base Business and a 4.7% contribution from COVID-19 testing performed through its Central Laboratories business.
Margins
Gross margin expanded 1464 basis points (bps) to 42.4% in the fourth quarter. Also, adjusted operating income improved 240.9% year over year to $1.39 billion. Adjusted operating margin expanded 1712 bps from the year-ago quarter to 30.9%.
Cash Position
LabCorp exited 2020 with cash and cash equivalents of $1.32 billion compared with $337.5 million at the end of 2019. Cumulative cash flow from operating activities at the end of the year was $1,360.7 million, up from $874.9 million a year ago. Additionally, cumulative free cash flow at the end of the fourth quarter was $774.6 million, up from $569.8 million a year ago.
At the end of 2020, the company had $800 million of authorization remaining under its share repurchase program.
2021 View
The company provided its 2021 guidance. Total Labcorp Enterprise revenues are expected to be down 1% to up 4.5%. This includes Base Business growth in the range of 11% to 13.5% and COVID-19 testing revenue decline in the range of 35% to 50%.
Total Diagnostics revenues are expected to down 0.5% to 7.5%. Total Drug Development revenues are expected to rise 8% to 10.5% from 2020.
Our Take
LabCorp exited the fourth quarter of 2020 with better-than-expected earnings and revenues. These figures improved on a year-over-year basis as well.
Diagnostics revenues in the quarter were significantly high on organic volume improvements as a result of growing demand for COVID-19 testing. Although there were still negative impacts of COVID-19 on organic Base Business volume, this part of the business is recovering fast.
Also, Covance Drug Development delivered higher sales.
However, the company’s 2021 guidance projects significant sinking of COVID-19 related testing revenues.
Zacks Rank
LabCorp currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have already announced quarterly results are Hologic, Inc. (HOLX - Free Report) , Abbott Laboratories (ABT - Free Report) and AngioDynamics, Inc. (ANGO - Free Report) . While Hologic sports a Zacks Rank of 1 (Strong Buy), both Abbott and AngioDynamics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Hologic reported first-quarter fiscal 2021 adjusted EPS of $2.86, which surpassed the Zacks Consensus Estimate by 33.6%.
Abbott reported fourth-quarter 2020 adjusted EPS of $1.45, which surpassed the Zacks Consensus Estimate by 6.6%. Further, fourth-quarter worldwide sales of $10.7 billion outpaced the consensus mark by 7.9%.
AngioDynamics reported second-quarter fiscal 2021 adjusted EPS of a penny. The Zacks Consensus Estimate was of a loss per share of 2 cents. Additionally, revenues of $72.8 million beat the consensus mark by 8%.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Click here to download this report FREE >>