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LabCorp (LH) to Report Q4 Earnings: What's in the Cards?

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Laboratory Corporation of America Holdings (LH - Free Report) , also known as LabCorp, is slated to report fourth-quarter and full-year 2021 results on Feb 10, before market open.

In the last reported quarter, the company’s adjusted earnings of $6.82 exceeded the Zacks Consensus Estimate by 42.98%. The company beat estimates in each of the trailing four quarters, the average surprise being 25.73%.

Factors at Play

LabCorp seems to be well poised on its three key strategies — delivering advanced diagnostics, bringing new medicines to patients faster and using technology to improve patient care.

Over the past few months, the company has been witnessing continued sales rebound in the base business for both Diagnostics and Drug Development. Just like the previously-reported quarter, the company’s fourth-quarter base-business performance is expected to have registered a recovery despite a spike in COVID-19 cases as patients and providers continue to return to routine healthcare checkups and pharmaceutical clients resume their important research activities. However, the pace of recovery might have slowed down from Q3 due to the industry-wide hospital staffing problem and COVID-induced increase in hospital occupancy, resulting in less focus on non-COVID treatment wings.

Its COVID-19 testing services are expected to have registered a surge in volume in Q4, given an increase in cases during the fourth-quarter months due to the emergence of the new variant of SARS-CoV-2 across the nation.

Covance Drug Development fourth-quarter results are expected to reflect an increase in organic revenues on base business growth and contribution from COVID testing performed through the central lab business.Per the company’s Oct 28 update,the Drug Development business continues to recover with nearly 85% of sites open. The business also saw decentralized trials increasing by more than 50% versus 2020. This momentum should have continued through the next two months as well, boosting the company’s Q4 top line.

In terms of pandemic response, the company recently received Emergency Use Authorization for a combined COVID and flu-at-home collection kit. With flu season upon us, the kit offers a convenient way to test for both viruses. LabCorp has also collaborated with AstraZeneca on both a COVID prevention and treatment trial of its new long-acting antibody combination. All the developments are expected to have positively contributed to the company’s Q4 performance.

In women’s health, in August, the company acquired Ovia Health, a digital health platform used by millions of women seeking information and support on family planning, pregnancy and parenting. This is expected to have contributed to the company’s Q4 top line.

In oncology, the company has made significant strides in recent times such as launching several new oncology tests, including OmniSeq INSIGHT, a pan-cancer tissue-based sequencing test for patients with advanced solid tumor cancers. Further, the company also launchedclonoSEQ, the first and only FDA-cleared test for monitoring residual blood cancer. All these developments are expected to have positively contributed to the company’s oncology arm in Q4.

Further, the company’s recent acquisition of Myriad Genetics’ autoimmune business unit, including the Vectra rheumatoid arthritis (RA) assay is likely to have contributed to the to-be-reported quarter’s top line.

Starting from June, the company’s Pixel by Labcorp COVID-19 PCR Test Home Collection Kit is available at 6,000 Walgreens stores nationwide and through Walgreens collaborations with on-demand delivery services like DoorDash and Instacart. This is expected to have contributed to the company’s Q4 performance. Strong execution of LaunchPad savings might have improved the Q4 margin.

The Zacks Consensus Estimate for Covance Drug Development segment’s Q4 revenues is pegged at $1.48 billion, indicating a rise of 5.9% from the prior-year quarter’s figure.

Within LabCorp Diagnostics, in the fourth quarter, growing demand for COVID-19 testing is expected to have positively impacted the volume scenario. Going by the industry trend, testing started to increase again from November on the Omicron variant spike. However, both COVID-19 testing as well as esoteric and routine testing is expected to report a decline when compared with a very strong 2020 fourth quarter.

Meanwhile, the LaunchPad initiative for Diagnostics too is expected to have contributed to the company’s Q4 margin.

The Zacks Consensus Estimate for LabCorp Diagnostics’ Q3 revenues is pegged at $518 million, significantly lower than the year-ago quarter’s reported figure of $1.2 billion.

Key Q4 Estimates

The Zacks Consensus Estimate for fourth-quarter earnings of $5.81 per share implies a 44.9% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $3.90 billion, suggesting a 13.2% fall from the prior-year reported number.

What Our Quantitative Model Suggests

Per our proven model, stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a good chance of beating estimates. This is exactly the case as you can see:

Earnings ESP: LabCorp has an Earnings ESP of +9.21%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: LabCorp currently carries a Zacks Rank #1.

Other Stocks Worth a Look

Cara Therapeutics (CARA - Free Report) has an Earnings ESP of +5.24% and a Zacks Rank of 1. Cara Therapeutics is slated to release fourth-quarter 2021 results on Feb 24.  

CARA’s earnings yield of 4.2% compares favorably with the industry’s 1.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +1.94% and a Zacks Rank of 2. Henry Schein is slated to release fourth-quarter 2021 results on Feb 15. 

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC’s earnings yield of 5.9% compares favorably with the industry’s 4.1%.

Guardant Health (GH - Free Report) has an Earnings ESP of +9.45% and is a Zacks #2 Ranked stock.

Guardant Healthis slated to release fourth-quarter 2021 results on Feb 23. Guardant Health’s long-term earnings growth rate is estimated at 9.45%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.