Labcorp Holdings (LH) Reports Q3 2024 Earnings

Labcorp Holdings (LH) has announced a 7% year-over-year revenue increase to $3.3 billion in its third-quarter earnings call for 2024. The company saw diagnostics revenue grow by 9%, with biopharma laboratory services rising by 3%. Adjusted earnings per share (EPS) were up by 4% at $3.50. Despite the impact of Hurricanes Helene and Milton, Labcorp has maintained a positive outlook, supported by strategic acquisitions and the launch of new products. Adjustments to operating income and margin were noted, along with a strong business development pipeline and anticipated savings from the LaunchPad initiative.

Key Takeaways

• Labcorp's Q3 revenue rose to $3.3 billion, marking a 7% increase from the same period last year.
• Adjusted EPS grew 4% to $3.50, with diagnostics and biopharma services contributing to the company's growth.
• The company completed acquisitions and launched new products, including the PGDx elio plasma focus Dx liquid biopsy test.
• Adjusted operating income stood at $441 million, with a margin decline primarily due to the Invitae (OTC:NVTAQ) acquisition.
• Labcorp expects to achieve $100 million to $125 million in savings from its LaunchPad initiative and anticipates capital expenditures to remain around 3.5% of revenue.
• The company remains optimistic about future growth, with a positive outlook for its diagnostics and biopharma segments.

Company Outlook

• Labcorp projects enterprise revenue growth of 6.6% to 7.3% for 2024.
• Adjusted EPS guidance is set between $14.30 and $14.70, with a slight decrease attributed to weather impacts.
• Free cash flow estimates range from $850 million to $980 million.
• Long-term growth rate for the biopharma segment is approximately 6%.

Bearish Highlights

• The company reported a 40 basis point decline in adjusted operating margin, mainly due to the Invitae acquisition.
• Hurricanes Helene and Milton impacted operations, contributing to margin pressures.

Bullish Highlights

• Diagnostics Laboratories revenue increased by 8.9% to $2.6 billion, with organic growth and acquisitions driving the rise.
• Biopharma Laboratory Services revenue grew by 2.6% to $738 million, with a backlog of $8.1 billion.
• The company expects margin improvements in the second half of the next year following the integration of Invitae.

Misses

• The adjusted tax rate decreased to 22.8% from 24% in the previous year.
• Net earnings from continuing operations were reported at $170 million, translating to $2 per diluted share.

Q&A Highlights

• Executives discussed the positive impact of the Invitae acquisition and anticipated contributions to revenue and margins.
• The company is prepared to manage potential disruptions from Walgreens closing some locations.
• Labcorp is focusing on acquisitions that are accretive in the first year and return their cost of capital within two to three years.

Conclusion

In conclusion, Labcorp's third-quarter earnings call showcased a company that is successfully navigating challenges while capitalizing on strategic initiatives to drive growth. With a focus on enhancing laboratory capabilities, particularly in rural areas, and the integration of new acquisitions like Invitae, Labcorp is setting a course for continued expansion and strong financial performance. The company's leadership expressed confidence in their ability to maintain growth momentum and improve margins, supported by a robust pipeline of business development opportunities and the ongoing success of the LaunchPad initiative. As Labcorp moves forward, it remains committed to delivering value to shareholders and supporting the communities it serves, even in the face of natural disasters and market fluctuations.

InvestingPro Insights

Labcorp's strong third-quarter performance aligns with several key insights from InvestingPro. The company's 7% revenue increase to $3.3 billion and 4% growth in adjusted EPS to $3.50 reflect its robust financial health.

According to InvestingPro data, Labcorp's revenue for the last twelve months as of Q2 2024 stood at $12.49 billion, with a healthy revenue growth of 5.22%. This growth trajectory is consistent with the company's Q3 results and its projected enterprise revenue growth of 6.6% to 7.3% for 2024.

An InvestingPro Tip highlights that Labcorp's net income is expected to grow this year, which corroborates the company's positive outlook and its ability to maintain profitability despite challenges like hurricane impacts. This expectation of growth is further supported by the company's adjusted EPS guidance of $14.30 to $14.70 for 2024.

Another relevant InvestingPro Tip notes that Labcorp is trading near its 52-week high, with the stock price at 96.06% of its 52-week high. This suggests investor confidence in the company's performance and future prospects, aligning with the bullish highlights from the earnings call, such as the strong growth in Diagnostics Laboratories revenue and the robust backlog in Biopharma Laboratory Services.

It's worth noting that InvestingPro offers 11 additional tips for Labcorp, providing investors with a more comprehensive analysis of the company's financial health and market position.

Company Presentation and Financial Performance

In the following segment of the earnings call, the executives of Labcorp provided detailed insights into their financial performance and company strategy, underscoring their resilience amid economic challenges.

Financial Results Overview

Revenue in the quarter was $3.3 billion, an increase of 7% compared to the third quarter of 2023. Diagnostics continued to deliver strong revenue growth, up 9%, driven by organic growth of 5%, while biopharma laboratory services revenue grew approximately 3%, driven by strong growth in central labs of 9%, partially offset by the expected decline of 11% in early development. The trailing 12-month book-to-bill was 1.02, with expectations for growth in the fourth quarter.

Labcorp remains committed to executing its strategy, leveraging advancements in technology and focusing on business development to ensure sustainable growth in the future. The company's leadership remains positive about the outlook for the remainder of the fiscal year and into 2025, with continued investments in innovation and enhancements in lab capabilities.

In summary, Labcorp demonstrates continued resilience and strategic positioning within the laboratory services market, focused on growth through innovation and robust partnerships, ensuring a bright future for the company and stakeholders.