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Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp reported third-quarter 2022 adjusted earnings per share (EPS) of $4.68, down 31.4% from the year-ago quarter’s figure. The adjusted figure excludes the impact of certain amortization expenses, restructuring charges, acquisition and disposition-related costs and loss from venture fund investments, among others. The bottom line missed the Zacks Consensus Estimate by 0.6%.
On a GAAP basis, net earnings for the third quarter were $3.90 per share, down 35.5% year over year.
Revenues
Revenues in the quarter under review fell 11.2% year over year to $3.61 billion and missed the Zacks Consensus Estimate by 5.7%.
The decline in revenues can be attributed to a 10.7% fall in organic revenues and a 1.3% negative impact from foreign currency translation. However, the downside was partially offset by 0.8% growth from acquisitions net of divestitures. The decline in organic revenues comprises a 11.8% 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 1.1% rise in the company's organic Base Business (business operation excluding the company’s COVID-19 testing).
Segments in Detail
For the third quarter, LabCorp Diagnostics reported revenues of $2.21 billion, reflecting a 15.7% fall year over year. On an organic basis, revenues were down 16.4%, partially offset by acquisitions of 0.9%. This decline in organic revenues resulted from a 18.4% drop in contribution from COVID-19 Testing, partially offset by a 1.9% rise in Base Business.
Laboratory Corporation of America Holdings Price, Consensus and EPS Surprise
The company witnessed a 10.3% fall in total volume (measured by requisition) on a 10.9% decline in organic volume and acquisition volume growth of 0.6%. Organic volume was primarily hampered by a 12.8% drop in COVID-19 Testing, partially offset by a 1.9% rise in Base Business.
Covance Drug Development revenues fell 3.7% to $1.46 billion in the third quarter due to a 3.4% negative impact from foreign currency translation. There has been 0.5% growth from acquisitions net of divestitures, offset by a 0.7% drop in organic Base Business revenues. There has been a 5% decline in COVID-related work and the Ukraine/Russia crisis.
Margins
Gross margin contracted 472 basis points (bps) to 29.4% in the third quarter. Adjusted operating income declined 36.5% year over year to $549.7 million. Adjusted operating margin contracted 606 bps from the year-ago quarter to 15.2%.
Cash Position
LabCorp exited the third quarter of 2022 with cash and cash equivalents of $409.9 million compared with $1.07 billion at the end of second-quarter 2022. Cumulative cash flow from operating activities at the end of the third quarter was $1.30 billion, significantly down from $2.41 billion a year ago. Additionally, cumulative free cash flow at the end of the quarter under review was $938.3 million, down from $2.10 billion a year ago.
At the end of third-quarter 2022, LabCorp repurchased $400.0 million of stock, representing approximately 1.5 million shares.
2022 View
The company has updated its 2022 guidance.
Total LabCorp Enterprise revenues (net of intersegment transaction eliminations, including Drug Development COVID-19 testing revenues) are expected to decline in the range of 6-7.5% (compared with the previously-projected decline in the range of 2-6%). Base Business growth is expected in the range of 3-4% (versus the previously-projected range of 5-7.5%). Meanwhile, COVID-19 testing revenues are expected to decline in the range of 57-59% (versus the earlier-projected decline in the range of 50%-60%).
Total Diagnostics revenues are expected to fall in the range of 10-11.5% (versus the earlier-projected decline in the band of 9-13%). Total Drug Development revenues are expected to decline in the range of 1.5-2.5% (versus the earlier projected growth 1.5-3.5%) in 2022.
The Zacks Consensus Estimate for full-year revenues is pegged at $15.25 billion.
The company expects full-year adjusted EPS in the band of $19.25-$20.25 (narrowed from the previous range of $19-$21.25). The Zacks Consensus Estimate for the metric is pegged at $20.28.
The company reduced its projected free cash flow figure to the range of $1.3-$1.4 billion (from the earlier expected range of $1.7-$1.9 billion).
Our Take
LabCorp ended the third quarter of 2022 with lower-than-expected earnings and revenues. Organic revenues declined significantly, mainly due to a major decrease in COVID-19 PCR and antibody testing sales. Contraction of both margins is discouraging. The severe foreign exchange headwind, inflationary pressure and the ongoing Ukraine/Russia crisis continue to impact business performance.The reduced guidance for 2022 is indicative of this dismal trend to continue through the rest of the year.
Meanwhile, the company is accelerating the planned spin-off of its Clinical Development business (announced in July). The company noted that it is managing inflationary headwinds and labor constraints through its LaunchPad initiatives.
Zacks Rank and Key Picks
LabCorp currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health Inc. (ELV - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and Centene Corporation (CNC - Free Report) .
Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.
Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 29.7% for full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.
Centene, carrying a Zacks Rank #2, reported third-quarter 2022 adjusted EPS of $1.30, which beat the Zacks Consensus Estimate by 6.6%. Revenues of $35.87 billion outpaced the consensus mark by 1.1%.
Centene has an estimated long-term growth rate of 14.2%. CNC’s earnings surpassed estimates in all the trailing four quarters, the average being 5.2%.
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LabCorp (LH) Misses Q3 Earnings Estimates, Updates Guidance
Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp reported third-quarter 2022 adjusted earnings per share (EPS) of $4.68, down 31.4% from the year-ago quarter’s figure. The adjusted figure excludes the impact of certain amortization expenses, restructuring charges, acquisition and disposition-related costs and loss from venture fund investments, among others. The bottom line missed the Zacks Consensus Estimate by 0.6%.
On a GAAP basis, net earnings for the third quarter were $3.90 per share, down 35.5% year over year.
Revenues
Revenues in the quarter under review fell 11.2% year over year to $3.61 billion and missed the Zacks Consensus Estimate by 5.7%.
The decline in revenues can be attributed to a 10.7% fall in organic revenues and a 1.3% negative impact from foreign currency translation. However, the downside was partially offset by 0.8% growth from acquisitions net of divestitures. The decline in organic revenues comprises a 11.8% 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 1.1% rise in the company's organic Base Business (business operation excluding the company’s COVID-19 testing).
Segments in Detail
For the third quarter, LabCorp Diagnostics reported revenues of $2.21 billion, reflecting a 15.7% fall year over year. On an organic basis, revenues were down 16.4%, partially offset by acquisitions of 0.9%. This decline in organic revenues resulted from a 18.4% drop in contribution from COVID-19 Testing, partially offset by a 1.9% rise in Base Business.
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
The company witnessed a 10.3% fall in total volume (measured by requisition) on a 10.9% decline in organic volume and acquisition volume growth of 0.6%. Organic volume was primarily hampered by a 12.8% drop in COVID-19 Testing, partially offset by a 1.9% rise in Base Business.
Covance Drug Development revenues fell 3.7% to $1.46 billion in the third quarter due to a 3.4% negative impact from foreign currency translation. There has been 0.5% growth from acquisitions net of divestitures, offset by a 0.7% drop in organic Base Business revenues. There has been a 5% decline in COVID-related work and the Ukraine/Russia crisis.
Margins
Gross margin contracted 472 basis points (bps) to 29.4% in the third quarter. Adjusted operating income declined 36.5% year over year to $549.7 million. Adjusted operating margin contracted 606 bps from the year-ago quarter to 15.2%.
Cash Position
LabCorp exited the third quarter of 2022 with cash and cash equivalents of $409.9 million compared with $1.07 billion at the end of second-quarter 2022. Cumulative cash flow from operating activities at the end of the third quarter was $1.30 billion, significantly down from $2.41 billion a year ago. Additionally, cumulative free cash flow at the end of the quarter under review was $938.3 million, down from $2.10 billion a year ago.
At the end of third-quarter 2022, LabCorp repurchased $400.0 million of stock, representing approximately 1.5 million shares.
2022 View
The company has updated its 2022 guidance.
Total LabCorp Enterprise revenues (net of intersegment transaction eliminations, including Drug Development COVID-19 testing revenues) are expected to decline in the range of 6-7.5% (compared with the previously-projected decline in the range of 2-6%). Base Business growth is expected in the range of 3-4% (versus the previously-projected range of 5-7.5%). Meanwhile, COVID-19 testing revenues are expected to decline in the range of 57-59% (versus the earlier-projected decline in the range of 50%-60%).
Total Diagnostics revenues are expected to fall in the range of 10-11.5% (versus the earlier-projected decline in the band of 9-13%). Total Drug Development revenues are expected to decline in the range of 1.5-2.5% (versus the earlier projected growth 1.5-3.5%) in 2022.
The Zacks Consensus Estimate for full-year revenues is pegged at $15.25 billion.
The company expects full-year adjusted EPS in the band of $19.25-$20.25 (narrowed from the previous range of $19-$21.25). The Zacks Consensus Estimate for the metric is pegged at $20.28.
The company reduced its projected free cash flow figure to the range of $1.3-$1.4 billion (from the earlier expected range of $1.7-$1.9 billion).
Our Take
LabCorp ended the third quarter of 2022 with lower-than-expected earnings and revenues. Organic revenues declined significantly, mainly due to a major decrease in COVID-19 PCR and antibody testing sales. Contraction of both margins is discouraging. The severe foreign exchange headwind, inflationary pressure and the ongoing Ukraine/Russia crisis continue to impact business performance.The reduced guidance for 2022 is indicative of this dismal trend to continue through the rest of the year.
Meanwhile, the company is accelerating the planned spin-off of its Clinical Development business (announced in July). The company noted that it is managing inflationary headwinds and labor constraints through its LaunchPad initiatives.
Zacks Rank and Key Picks
LabCorp currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Elevance Health Inc. (ELV - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and Centene Corporation (CNC - Free Report) .
Elevance Health, carrying a Zacks Rank #2 (Buy), reported third-quarter 2022 adjusted EPS of $7.53, which beat the Zacks Consensus Estimate by 6.1%. Revenues of $39.63 billion outpaced the consensus mark by 1.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has an estimated long-term growth rate of 12%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average being 4.1%.
Medpace Holdings, sporting a Zacks Rank #1, reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 29.7% for full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.
Centene, carrying a Zacks Rank #2, reported third-quarter 2022 adjusted EPS of $1.30, which beat the Zacks Consensus Estimate by 6.6%. Revenues of $35.87 billion outpaced the consensus mark by 1.1%.
Centene has an estimated long-term growth rate of 14.2%. CNC’s earnings surpassed estimates in all the trailing four quarters, the average being 5.2%.