We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
LabCorp (LH) Up 3.6% Since Earnings Report: Can It Continue?
Read MoreHide Full Article
It has been about a month since the last earnings report for Laboratory Corporation of America Holdings (LH - Free Report) . Shares have added about 3.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
LabCorp reported fourth-quarter 2016 adjusted earnings per share (EPS) of $2.15, up 8.6% from the year-ago quarter. The quarter’s adjusted EPS also exceeded the Zacks Consensus Estimate by 1.4%. On a reported basis, LabCorp’s net earnings came in at $1.75 per share compared with $1.07 a year ago.
Full-year 2016 adjusted EPS improved 11.6% from the previous year to $8.83, surpassing the Zacks Consensus Estimate of $8.79 billion.
Net revenue for the fourth quarter increased 6.3% year over year to $2.39 billion, surpassing the Zacks Consensus Estimate by 1.7%. Strong organic volume growth and acquisitions contributed to the top-line growth. However, these positives were partially offset by adverse currency exchange movement to the tune of 60 basis points (bps). Organic revenue growth (excluding the currency impact) was 4.3%.
Full-year net revenue was $9.44 billion, up 11.0% from the year-ago period and above the Zacks Consensus Estimate of $9.42 billion.
Quarter Under Review
Currently, LabCorp reports under two operating segments: LabCorp Diagnostics (LabCorp’s legacy business, except for its clinical trial services business, which is now part of Covance Drug Development and includes the nutritional chemistry and food safety business, previously part of Covance), and Covance Drug Development (Covance’s legacy business, except for its nutritional chemistry and food safety business, which is now part of LabCorp Diagnostics and includes LabCorp’s legacy clinical trial services business).
In the reported quarter, LabCorp Diagnostics reported net revenue of $1.67 billion, up 7.8% year over year, fueled by price, mix, tuck-in acquisitions and organic volume, partially offset by unfavorable foreign currency translation of 0.1%. The company reported 2.7% increase in total volume (measured by requisition) and a 5.2% increase in revenue per requisition in the quarter.
Covance Drug Development reported a 3.5% rise in net revenue to $715.6 million in the fourth quarter, driven by broad-based demand and favorable product mix, partially offset by negative impact due to foreign currency translation. At Constant Exchange Rate (CER) and excluding the impact of the expiration of the Sanofi site support agreement, net revenue increased 6.1% year over year on higher demand.
Gross margin improved 2 bps to 33% in the quarter. Adjusted operating income increased 14.2% year over year to $382 million. Adjusted operating margin expanded 110 bps from the year-ago quarter to 16% on a marginal 0.04% rise in selling, general and administrative expenses to $406 million.
LabCorp exited the year with cash and cash equivalents of $433.6 million compared with $716.4 million at the end of 2015. Full-year operating cash flow was $1.18 billion, up from $982.4 million in the year-ago period. Free cash flow came in at $897 million, significantly up from free cash flow of $726.6 million in the year-ago period.
Outlook
LabCorp provided its 2017 financial outlook. Net revenue growth expectations remain in the band of 4.5−6.5% year over year. This includes a 60 bps impact from unfavorable foreign exchange headwind resulting in constant currency revenue growth of 5.1% to 7.1%. The current Zacks Consensus Estimate for revenues is pegged at $9.89 billion.
Adjusted EPS guidance for 2017 has also been projected in the range of $9.35−$9.75. The current Zacks Consensus Estimate of $9.64 falls within the guided range.
Free cash flow expectation remains within $925−$975 million (up 3–9% from the prior year).
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one upward revision for the current quarter compared to five downward.
Laboratory Corporation of America Holdings Price and Consensus
At this time, LabCorp's stock has a good Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly. the stocvk has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
LabCorp (LH) Up 3.6% Since Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Laboratory Corporation of America Holdings (LH - Free Report) . Shares have added about 3.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Recent Earnings
LabCorp reported fourth-quarter 2016 adjusted earnings per share (EPS) of $2.15, up 8.6% from the year-ago quarter. The quarter’s adjusted EPS also exceeded the Zacks Consensus Estimate by 1.4%. On a reported basis, LabCorp’s net earnings came in at $1.75 per share compared with $1.07 a year ago.
Full-year 2016 adjusted EPS improved 11.6% from the previous year to $8.83, surpassing the Zacks Consensus Estimate of $8.79 billion.
Net revenue for the fourth quarter increased 6.3% year over year to $2.39 billion, surpassing the Zacks Consensus Estimate by 1.7%. Strong organic volume growth and acquisitions contributed to the top-line growth. However, these positives were partially offset by adverse currency exchange movement to the tune of 60 basis points (bps). Organic revenue growth (excluding the currency impact) was 4.3%.
Full-year net revenue was $9.44 billion, up 11.0% from the year-ago period and above the Zacks Consensus Estimate of $9.42 billion.
Quarter Under Review
Currently, LabCorp reports under two operating segments: LabCorp Diagnostics (LabCorp’s legacy business, except for its clinical trial services business, which is now part of Covance Drug Development and includes the nutritional chemistry and food safety business, previously part of Covance), and Covance Drug Development (Covance’s legacy business, except for its nutritional chemistry and food safety business, which is now part of LabCorp Diagnostics and includes LabCorp’s legacy clinical trial services business).
In the reported quarter, LabCorp Diagnostics reported net revenue of $1.67 billion, up 7.8% year over year, fueled by price, mix, tuck-in acquisitions and organic volume, partially offset by unfavorable foreign currency translation of 0.1%. The company reported 2.7% increase in total volume (measured by requisition) and a 5.2% increase in revenue per requisition in the quarter.
Covance Drug Development reported a 3.5% rise in net revenue to $715.6 million in the fourth quarter, driven by broad-based demand and favorable product mix, partially offset by negative impact due to foreign currency translation. At Constant Exchange Rate (CER) and excluding the impact of the expiration of the Sanofi site support agreement, net revenue increased 6.1% year over year on higher demand.
Gross margin improved 2 bps to 33% in the quarter. Adjusted operating income increased 14.2% year over year to $382 million. Adjusted operating margin expanded 110 bps from the year-ago quarter to 16% on a marginal 0.04% rise in selling, general and administrative expenses to $406 million.
LabCorp exited the year with cash and cash equivalents of $433.6 million compared with $716.4 million at the end of 2015. Full-year operating cash flow was $1.18 billion, up from $982.4 million in the year-ago period. Free cash flow came in at $897 million, significantly up from free cash flow of $726.6 million in the year-ago period.
Outlook
LabCorp provided its 2017 financial outlook. Net revenue growth expectations remain in the band of 4.5−6.5% year over year. This includes a 60 bps impact from unfavorable foreign exchange headwind resulting in constant currency revenue growth of 5.1% to 7.1%. The current Zacks Consensus Estimate for revenues is pegged at $9.89 billion.
Adjusted EPS guidance for 2017 has also been projected in the range of $9.35−$9.75. The current Zacks Consensus Estimate of $9.64 falls within the guided range.
Free cash flow expectation remains within $925−$975 million (up 3–9% from the prior year).
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one upward revision for the current quarter compared to five downward.
Laboratory Corporation of America Holdings Price and Consensus
Laboratory Corporation of America Holdings Price and Consensus | Laboratory Corporation of America Holdings Quote
VGM Scores
At this time, LabCorp's stock has a good Growth Score of 'B', though it is lagging a lot on the momentum front with an 'F'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly. the stocvk has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.