Laboratory Corporation of America Holdings ( LH Quick Quote LH - Free Report) or LabCorp reported second-quarter 2021 adjusted earnings per share (EPS) of $6.13, a 138.5% surge from the year-ago figure. The adjusted figure excludes the impact of certain debt refinancing costs and change in UK tax rates among others. The bottom line surpassed the Zacks Consensus Estimate by 8.7%.
On a GAAP basis, net earnings were $4.76 per share, up 100.8% year over year.
Revenues in the quarter under review increased 38.7% year over year to $3.84 billion and exceeded the Zacks Consensus Estimate by 6.9%.
The increase in revenues can be attributed to 35.5% growth in organic base business (excluding COVID-19 testing revenues), 1.2% growth from acquisitions and 2% contribution from favorable foreign currency translation. COVID-19 PCR and antibody testing revenues were $444 million in the reported quarter, flat year over year.
Quarter in Detail
LabCorp reports results under two operating segments — LabCorp Diagnostics and Covance Drug Development.
LabCorp Diagnostics second-quarter revenues of $2.37 billion reflected 39.7% rise year over year. On an organic basis, Base Business grew 37.8%. There was a 0.9% favorable impact from foreign currency translation. Acquisition-related growth was 1.1% in the quarter. COVID-19 Testing revenues were $444 million in the reported quarter, flat year over year.
The company witnessed a 39.6% rise in total volume (measured by requisition). Organic volume improved 38.7%. Acquisition volume growth was 0.9%. Organic volume growth was primarily based on a 39.4% rise in Base Business, partially offset by 0.7% reduction in COVID-19 testing demand.
Covance Drug Development revenues grew 36.7% to $1.50 billion in the second quarter on organic Base Business growth of 32.1%, acquisition growth of 1.3% and favorable foreign currency translation of 3.7%. However, this was partially offset by 0.3% decline in COVID-19 testing performed through its Central Laboratories business. Margins
Gross margin expanded 546 basis points (bps) to 32.9% in the second quarter. Also, adjusted operating income was $806.1 million, a 121.3% surge from the year-ago period. Adjusted operating margin expanded 784 bps from the year-ago quarter to 20.9%.
LabCorp exited the second quarter with cash and cash equivalents of $1.96 billion compared with $1.89 billion at the end of the first quarter. Cumulative cash flow from operating activities at the end of the second quarter was $1.64 billion, up from $574.5 million a year ago. Additionally, cumulative free cash flow at the end of the second quarter was $1.45 billion, up from $369.4 million a year ago.
In the second quarter, the company repurchased shares worth $300 million under its existing share repurchase program.
The company raised its 2021 guidance. Total Labcorp Enterprise revenues are expected to grow in the range of 6.5-9% (earlier expectation was 2-6% growth). This includes Base Business growth in the range of 17-19% (13.5-16%). COVID-19 testing revenues are expected to decline in the range of 33-35% (down 35-50%).
Total Diagnostics revenues are expected to be down 1% to up 2% (earlier expectation was flat to 5% decline). Total Drug Development revenues are expected to rise 17% to 19% (12% to 14% growth expected earlier) from 2020.
The Zacks Consensus Estimate for full-year revenues is pegged at $14.56 billion.
LabCorp exited the second quarter of 2021 with better-than-expected earnings and revenues. The figures improved on a year-over-year basis as well.
Diagnostics revenues in the quarter were significantly high on organic Base Business volume improvements despite decelerating demand for COVID-19 testing.
Also, Covance Drug Development delivered higher sales. In the quarter under review, Drug Development benefited from broad-based demand across businesses, including COVID-19 vaccine and therapeutic work.
The company has raised its 2021 guidance even after taking into account the significant sinking of COVID-related testing revenues.
LabCorp currently has a Zacks Rank #2 (Buy).
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