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LabCorp (LH) to Report Q3 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 third-quarter 2022 results on Oct 27, before market open.
In the last reported quarter, the company’s adjusted earnings of $4.96 exceeded the Zacks Consensus Estimate by 6.2%. The company beat estimates in each of the trailing four quarters, the average surprise being 16.96%.
Factors at Play
LabCorp has been registering an ongoing sales rebound in the base business for both Diagnostics and Drug Development segments. However, as the severity of the pandemic has declined, we expect the demand for COVID-19 testing services and vaccines to have been lower than the year-ago period, impacting the third-quarter sales performance. Added to this, the ongoing inflationary pressure, a strengthening U.S. dollar and supply chain issues are expected to have adversely impacted LabCorp’s third-quarter performance. Going by the industry-wide trend so far, logistical challenges and increasing unit cost might have weighed on the corporate profitability of the company.
Laboratory Corporation of America Holdings Price and EPS Surprise
The company is positive about its new LaunchPad business process improvement initiative, which is anticipated to deliver $350 million in savings over the next three years. The new initiative is expected to have partially offset the company’s third-quarter margin erosion.
Covance Drug Development is likely to have benefited in Q3 from continued growth in the organic base business and a strong backlog of $15.2 billion at the end of the second quarter. The company earlier expected approximately $4.8 billion of this backlog to convert into revenues over the next 12 months.
However, similar to the last reported quarter, growth in early development and clinical development is expected to have been offset by central labs on account of a significant slowdown in COVID-related work and the Russia-Ukraine crisis. On a positive note, the company recently expanded its central labs kit production capabilities to improve delivery and address growing demand across Europe, the Middle East and Africa. It announced the planned expansion of its central labs presence and drug development capabilities in Japan in collaboration with BML. Turning to oncology. the company continues to deepen its leadership position by expanding its cancer-related diagnostic screening and testing portfolio and by partnering with its pharmaceutical clients.
In terms of monkeypox response, the company in collaboration with the CDC and FDA, has become the first national laboratory to begin testing for monkeypox using the CDC test. This should have contributed to the segment’s top line in Q3.
Earlier in 2022, LabCorp and Walgreens announced the nationwide availability of Pixel by Labcorp COVID-19 at-home collection kit to allow greater access to reliable, convenient testing services within communities. These initiatives are likely to have made significant contributions to the company’s second-quarter performance.
The Zacks Consensus Estimate for the Covance Drug Development segment’s third-quarter revenues is pegged at $1.56 billion, indicating a rise of 6.6% from the prior-year quarter’s figure. Our model projects Q3 drug development revenues to be $1,54 billion, a 5.8% improvement year over year.
Within LabCorp Diagnostics, base business organic volume is anticipated to have continued its rally, led by consistent growth in esoteric and routine procedures. However, a slowdown in COVID-19 testing is likely to have hampered sales performance within the segment. In this regard, in the second quarter, in terms of COVID-19 testing, rates dropped and LabCorp expected the decline to continue for the remainder of 2022. This is expected to get reflected in the company’s Q3 earnings release itself.
In terms of base business, the company recently introduced multiple innovative and high-quality diagnostics to consumers and physicians. LabCorp also continued to expand its at-home test offerings through Labcorp OnDemand, including a first-of-kind blood collection device for diabetes risk screening. In addition, the company launched an FDA-approved men's rapid fertility test. For brain injuries and neurodegenerative disease, in July, the company was the first to begin offering a test that can help physicians diagnose conditions, including concussions, Alzheimer's and Parkinson's. All these developments are expected to have contributed to the company’s Diagnostics arm in the third quarter.
The Zacks Consensus Estimate for LabCorp Diagnostics’ third-quarter revenues is pegged at $2.28 billion, implying a 13.1% decline from the year-ago quarter’s reported figure.
Key Q3 Estimates
The Zacks Consensus Estimate for third-quarter earnings of $4.72 per share implies a 30.8% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $3.84 billion, suggesting a 5.5% fall from the prior-year reported number.
What Our Model Suggests
Per our proven model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here, as you can see:
Earnings ESP: The company has an Earnings ESP of -2.25%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.
Charles River Laboratories International (CRL - Free Report) has an Earnings ESP of +0.66% and a Zacks Rank of #3. The company will release third-quarter 2022 results on Nov 2.
Charles River has a long-term historical earnings growth rate of 17.7%. Charles River’s earnings yield of 5.47% compares favorably with the industry’s -2.84%.
McKesson (MCK - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank of #2. McKesson is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.94% compares favorably with the industry’s 5.22%.
Humana (HUM - Free Report) currently has an Earnings ESP of +0.76% and a Zacks Rank of #1. Humana is slated to release third-quarter 2022 results on Nov 2.
Image: Shutterstock
LabCorp (LH) to Report Q3 Earnings: What's in the Cards?
Laboratory Corporation of America Holdings (LH - Free Report) , also known as LabCorp, is slated to report third-quarter 2022 results on Oct 27, before market open.
In the last reported quarter, the company’s adjusted earnings of $4.96 exceeded the Zacks Consensus Estimate by 6.2%. The company beat estimates in each of the trailing four quarters, the average surprise being 16.96%.
Factors at Play
LabCorp has been registering an ongoing sales rebound in the base business for both Diagnostics and Drug Development segments. However, as the severity of the pandemic has declined, we expect the demand for COVID-19 testing services and vaccines to have been lower than the year-ago period, impacting the third-quarter sales performance. Added to this, the ongoing inflationary pressure, a strengthening U.S. dollar and supply chain issues are expected to have adversely impacted LabCorp’s third-quarter performance. Going by the industry-wide trend so far, logistical challenges and increasing unit cost might have weighed on the corporate profitability of the company.
Laboratory Corporation of America Holdings Price and EPS Surprise
Laboratory Corporation of America Holdings price-eps-surprise | Laboratory Corporation of America Holdings Quote
The company is positive about its new LaunchPad business process improvement initiative, which is anticipated to deliver $350 million in savings over the next three years. The new initiative is expected to have partially offset the company’s third-quarter margin erosion.
Covance Drug Development is likely to have benefited in Q3 from continued growth in the organic base business and a strong backlog of $15.2 billion at the end of the second quarter. The company earlier expected approximately $4.8 billion of this backlog to convert into revenues over the next 12 months.
However, similar to the last reported quarter, growth in early development and clinical development is expected to have been offset by central labs on account of a significant slowdown in COVID-related work and the Russia-Ukraine crisis. On a positive note, the company recently expanded its central labs kit production capabilities to improve delivery and address growing demand across Europe, the Middle East and Africa. It announced the planned expansion of its central labs presence and drug development capabilities in Japan in collaboration with BML. Turning to oncology. the company continues to deepen its leadership position by expanding its cancer-related diagnostic screening and testing portfolio and by partnering with its pharmaceutical clients.
In terms of monkeypox response, the company in collaboration with the CDC and FDA, has become the first national laboratory to begin testing for monkeypox using the CDC test. This should have contributed to the segment’s top line in Q3.
Earlier in 2022, LabCorp and Walgreens announced the nationwide availability of Pixel by Labcorp COVID-19 at-home collection kit to allow greater access to reliable, convenient testing services within communities. These initiatives are likely to have made significant contributions to the company’s second-quarter performance.
The Zacks Consensus Estimate for the Covance Drug Development segment’s third-quarter revenues is pegged at $1.56 billion, indicating a rise of 6.6% from the prior-year quarter’s figure. Our model projects Q3 drug development revenues to be $1,54 billion, a 5.8% improvement year over year.
Within LabCorp Diagnostics, base business organic volume is anticipated to have continued its rally, led by consistent growth in esoteric and routine procedures. However, a slowdown in COVID-19 testing is likely to have hampered sales performance within the segment. In this regard, in the second quarter, in terms of COVID-19 testing, rates dropped and LabCorp expected the decline to continue for the remainder of 2022. This is expected to get reflected in the company’s Q3 earnings release itself.
In terms of base business, the company recently introduced multiple innovative and high-quality diagnostics to consumers and physicians. LabCorp also continued to expand its at-home test offerings through Labcorp OnDemand, including a first-of-kind blood collection device for diabetes risk screening. In addition, the company launched an FDA-approved men's rapid fertility test. For brain injuries and neurodegenerative disease, in July, the company was the first to begin offering a test that can help physicians diagnose conditions, including concussions, Alzheimer's and Parkinson's. All these developments are expected to have contributed to the company’s Diagnostics arm in the third quarter.
The Zacks Consensus Estimate for LabCorp Diagnostics’ third-quarter revenues is pegged at $2.28 billion, implying a 13.1% decline from the year-ago quarter’s reported figure.
Key Q3 Estimates
The Zacks Consensus Estimate for third-quarter earnings of $4.72 per share implies a 30.8% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $3.84 billion, suggesting a 5.5% fall from the prior-year reported number.
What Our Model Suggests
Per our proven model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has higher chances of beating estimates. However, this is not the case here, as you can see:
Earnings ESP: The company has an Earnings ESP of -2.25%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.
Charles River Laboratories International (CRL - Free Report) has an Earnings ESP of +0.66% and a Zacks Rank of #3. The company will release third-quarter 2022 results on Nov 2.
Charles River has a long-term historical earnings growth rate of 17.7%. Charles River’s earnings yield of 5.47% compares favorably with the industry’s -2.84%.
McKesson (MCK - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank of #2. McKesson is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.94% compares favorably with the industry’s 5.22%.
Humana (HUM - Free Report) currently has an Earnings ESP of +0.76% and a Zacks Rank of #1. Humana is slated to release third-quarter 2022 results on Nov 2.
Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5.02% compares favorably with the industry’s 5.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.