LabCorp's Stock Soars After Q2 Performance, Analyst Highlights Strong Position In Healthcare Sector

Thursday, Laboratory Corp A reported second-quarter 2024 adjusted EPS of $3.94, up from $3.42 a year ago, beating the consensus of $3.78.

Sales increased 6.2% year-over-year to $3.22 billion, beating the consensus of $3.19 billion.

The increase was due to organic revenue of 3.8%, acquisitions, and net of divestitures of 2.5%, partially offset by foreign currency translation of (0.1%).

The 3.8% increase in organic revenue was driven by a 4.5% increase in the company’s organic Base Business, partially offset by a (0.7%) decrease in COVID-19 testing. 

Operating income for the quarter was $294.8 million, or 9.2% of revenue, compared to $266.3 million, or 8.8%, in the second quarter of 2023.

Diagnostics Laboratories revenue for the quarter was $2.52 billion, an increase of 7.9%.

Biopharma Laboratory Services revenue increased 1.1% to $707.0 million.

Guidance: LabCorp cuts its 2024 adjusted EPS outlook from $14.45-$15.35 to $14.30-$14.90, compared to the consensus of $14.82.

The company raised the 2024 revenue growth outlook from 4.8%- 6.4% to 6.4%- 7.5%, compared to the consensus of $12.83 billion.

William Blair writes, “At first blush, there is not much to pick at in the quarter as modest revenue upside and margin expansion above expectation should be viewed positively.”

With expectations slightly lowered compared to last week following Quest Diagnostics Incorporated’s DGX report, the analyst writes the update will help Labcorp shares maintain their current multiple of around 13 times the expected 2025 EPS.

Although the reductions in profitability related to Invitae are slightly greater than anticipated, this should provide ample opportunity for Labcorp to demonstrate the long-term value of this acquisition.

Labcorp remains well-positioned as a reliable and predictable growth company within the healthcare sector.

William Blair reiterates the Outperform rating.

Price Action: LH stock is up 6.10% at $228.59 at the last check on Thursday.

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