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LabCorp (LH) Base Business Growth Strong, Margin Pressure Stays
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Laboratory Corporation of America Holdingsor LabCorp’s (LH - Free Report) continued efforts to expand to high-growth opportunity areas buoy optimism. The current economic uncertainty, including a challenging volume environment for testing laboratories, and utilization weaknesses are headwinds. The stock carries a Zacks Rank #3 (Hold).
LabCorp ended the first quarter of 2023 with better-than-expected revenues. The company continued integrating the Ascension health system laboratories during the first quarter of 2023. Its Diagnostics Base Business revenues increased year over year in the quarter, driven by routine and esoteric testing and a benefit from hospital deals. The company continues to expand its digital health platform Labcorp OnDemand with the launch of three new tests during the reported quarter.
The company is progressing well with its planned spin-off of the Clinical Development business, which is expected to be completed in mid-2023, subject to the satisfaction of certain customary conditions. Per the first-quarter update, the company’s LaunchPad initiative continues to be on track to deliver $350 million of savings over the three-year period ending 2024.
In its efforts to further expand, LabCorp is focusing more on high-growth opportunity areas such as neurodegenerative, autoimmune and liver disease as well as cell and gene therapy.
During the first quarter, LabCorp also entered into a strategic collaboration with VieCure to provide clinicians greater access to precision oncology decision support. Moreover, the company continues to expand its digital health platform LabCorp OnDemand with the launch of three new tests in the first quarter, including a PSA prostate cancer screening test, a hepatitis B immunity test and a fatigue test for people with chronic fatigue systems, including post-COVID fatigue.
In February 2023, LabCorp expanded its Ovia app, which allows women to track menopause symptoms and access valuable resources and support to address the transition to menopause/perimenopause.
On the flip side, LabCorp ended the first quarter of 2023 with lower-than-expected earnings. On a year-over-year basis, Q1 revenues and adjusted EPS declined significantly. Organic revenues declined mainly due to a major decrease in COVID-19 PCR and antibody testing sales.
Significant contraction of both margins is discouraging. Gross margin contracted 582 basis points (bps) to 25.8% in the first quarter. Adjusted operating margin contracted 857 bps from the year-ago quarter’s levels to 11.1%.
The severe foreign exchange headwind, inflationary pressure and the ongoing Ukraine/Russia crisis continue to impact business performance.
Over the past year, LabCorp has underperformed its industry. Shares of LabCorp have declined 8.7% against the industry’s 9% rise.
Zimmer Biomet, sporting a Zacks Rank #1 (Strong Buy) at present, has an earnings yield of 5.42% against the industry’s -1.86%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%.
Zimmer Biomet’s shares have increased 14.6% in contrast to the industry’s 29.6% decline in the past year.
Penumbra, carrying a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra’s shares have risen 60.4% against the industry’s 29.6% fall over the past year.
PEN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.68% compared to the industry’s -7.62%. Shares of HOLX have risen 4.2% compared with the industry’s 2.1% rise over the past year.
HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.
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LabCorp (LH) Base Business Growth Strong, Margin Pressure Stays
Laboratory Corporation of America Holdingsor LabCorp’s (LH - Free Report) continued efforts to expand to high-growth opportunity areas buoy optimism. The current economic uncertainty, including a challenging volume environment for testing laboratories, and utilization weaknesses are headwinds. The stock carries a Zacks Rank #3 (Hold).
LabCorp ended the first quarter of 2023 with better-than-expected revenues. The company continued integrating the Ascension health system laboratories during the first quarter of 2023. Its Diagnostics Base Business revenues increased year over year in the quarter, driven by routine and esoteric testing and a benefit from hospital deals. The company continues to expand its digital health platform Labcorp OnDemand with the launch of three new tests during the reported quarter.
The company is progressing well with its planned spin-off of the Clinical Development business, which is expected to be completed in mid-2023, subject to the satisfaction of certain customary conditions. Per the first-quarter update, the company’s LaunchPad initiative continues to be on track to deliver $350 million of savings over the three-year period ending 2024.
In its efforts to further expand, LabCorp is focusing more on high-growth opportunity areas such as neurodegenerative, autoimmune and liver disease as well as cell and gene therapy.
Laboratory Corporation of America Holdings Price
Laboratory Corporation of America Holdings price | Laboratory Corporation of America Holdings Quote
During the first quarter, LabCorp also entered into a strategic collaboration with VieCure to provide clinicians greater access to precision oncology decision support. Moreover, the company continues to expand its digital health platform LabCorp OnDemand with the launch of three new tests in the first quarter, including a PSA prostate cancer screening test, a hepatitis B immunity test and a fatigue test for people with chronic fatigue systems, including post-COVID fatigue.
In February 2023, LabCorp expanded its Ovia app, which allows women to track menopause symptoms and access valuable resources and support to address the transition to menopause/perimenopause.
On the flip side, LabCorp ended the first quarter of 2023 with lower-than-expected earnings. On a year-over-year basis, Q1 revenues and adjusted EPS declined significantly. Organic revenues declined mainly due to a major decrease in COVID-19 PCR and antibody testing sales.
Significant contraction of both margins is discouraging. Gross margin contracted 582 basis points (bps) to 25.8% in the first quarter. Adjusted operating margin contracted 857 bps from the year-ago quarter’s levels to 11.1%.
The severe foreign exchange headwind, inflationary pressure and the ongoing Ukraine/Russia crisis continue to impact business performance.
Over the past year, LabCorp has underperformed its industry. Shares of LabCorp have declined 8.7% against the industry’s 9% rise.
Key Picks
Some better-ranked stocks in the broader medical space are Zimmer Biomet (ZBH - Free Report) , Penumbra (PEN - Free Report) and Hologic, Inc. (HOLX - Free Report) .
Zimmer Biomet, sporting a Zacks Rank #1 (Strong Buy) at present, has an earnings yield of 5.42% against the industry’s -1.86%. Zimmer Biomet’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 7.38%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Zimmer Biomet’s shares have increased 14.6% in contrast to the industry’s 29.6% decline in the past year.
Penumbra, carrying a Zacks Rank #1 at present, has an estimated growth rate of 64.1% for 2024. Penumbra’s shares have risen 60.4% against the industry’s 29.6% fall over the past year.
PEN’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 109.4%.
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 4.68% compared to the industry’s -7.62%. Shares of HOLX have risen 4.2% compared with the industry’s 2.1% rise over the past year.
HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 27.3%.