Laboratory Corporation of America Holdings LH, or Labcorp, reported adjusted earnings per share (EPS) of $3.68 in the first quarter of 2024, up 6.4% from the year-ago quarter’s figure.

The adjusted figure excludes the impact of certain amortization expenses and restructuring charges, among others. The bottom line also beat the Zacks Consensus Estimate by 6.4%.

On a GAAP basis, EPS in the first quarter was $2.69, up 12.6% from the last year’s comparable period.

Revenues

Revenues in the quarter under review rose 4.6% year over year to $3.18 billion. The metric surpassed the Zacks Consensus Estimate by 1.6%.

The increase was due to organic revenues of 2.3%, acquisitions, net of divestitures, of 1.8% and foreign currency translation of 0.5%. The 2.3% increase in organic revenues was driven by a 4.2% rise in the company's organic Base Business, partially offset by a 1.9% decline in PCR testing (COVID-19 Testing).

Segments in Detail

The company currently operates under two segments — Diagnostics Laboratories and Biopharma Laboratory Services (comprised of its Central Laboratories and Early Development Research Laboratories).

For the first quarter, Diagnostics Laboratories reported revenues of $2.48 billion, reflecting a 4.1% rise year over year.

On an organic basis, revenues were up 1.8%, driven by a 4.3% increase in the Base Business, partially offset by a 2.5% decline in COVID-19 Testing. The company’s total volumes (measured by requisitions) increased by 3.4% as acquisition volumes contributed 2.2%, and organic volumes rose 1.2%.

Labcorp Price, Consensus and EPS Surprise Labcorp Price, Consensus and EPS Surprise

Labcorp price-consensus-eps-surprise-chart | Labcorp Quote

Biopharma Laboratory Services revenues rose 7.5% to $661.3 million in the first quarter. The year-over-year increase was primarily driven by organic growth of 5.1% and foreign currency translation of 2.4%.

Margins

The gross margin expanded 26 basis points (bps) to 28.3% in the first quarter despite a 4.2% rise in the cost of revenues.

The adjusted operating income declined 1% year over year to $388.9 million. The adjusted operating margin contracted 69 bps from the year-ago quarter’s levels to 12.2%.

Cash Position

Labcorp exited the first quarter of 2024 with cash and cash equivalents of $99.3 million compared with $536.8 million at the end of 2023. Long-term debt (excluding the current portion) was $3.05 billion, down from $4.05 billion at 2023-end.

Cumulative cash outflow from operating activities at the end of the first quarter was $29.8 million compared to cash inflow of $121.2 million in the prior year’s comparable period.



In the same release, Labcorp announced its intention to implement a new holding company structure on May 17, 2024. The name of the new holding company will be Labcorp Holdings Inc., which will replace Laboratory Corporation of America Holdings as the publicly traded entity, and Laboratory Corporation of America Holdings will become a wholly owned subsidiary of Labcorp Holdings Inc.

2024 View

The company provided an updated 2024 guidance.

Total Labcorp Enterprise revenues for 2024 are expected to grow in the range of 4.8%-6.4% (earlier 4.7-6.5%). Diagnostics Laboratories revenues are expected to grow in the range of 4.8%-6% (previously 3.2%-4.8%). Total Biopharma Laboratory Services revenues are expected to rise in the range of 3.7%-5.7% (from the earlier 5.5%-7.5%) in 2024.

The Zacks Consensus Estimate for full-year revenues is pegged at $12.78 billion.

The company expects full-year adjusted EPS in the band of $14.45-$15.35 (previously $14.30-$15.40). The Zacks Consensus Estimate for the metric is pegged at $14.84.

The company projects 2024 free cash flow from continued operation in the range of $1.00-$1.15 billion (unchanged).

Our Take

Labcorp ended the first quarter of 2024 with earnings and revenues beating estimates. Throughout the first quarter, the company held a strong position as a partner of choice for health systems and regional/local laboratories, announcing or completing several transactions. The expansion of the gross margin appears encouraging for the stock.

Labcorp advanced a number of key growth initiatives that supported its strategy, including an agreement to acquire select assets of BioReference Health's diagnostic business, and also closed important transactions such as health system agreements with Baystate Health in Massachusetts and Providence in California and a regional lab acquisition in California. Additionally, LH launched a test to identify pTau217 — a pivotal blood biomarker for Alzheimer's and introduced its Weight Loss Management portfolio.

Meanwhile, the contraction of the adjusted operating margin in the quarter is disappointing.

Zacks Rank and Other Key Picks

Labcorp currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are Inspire Medical Systems INSP, Transmedics Group TMDX and Exact Sciences EXAS.

Inspire Medical Systems, sporting a Zacks Rank #1 (Strong Buy), reported a fourth-quarter 2023 EPS of 49 cents, which beat the Zacks Consensus Estimate of a loss of 4 cents. Revenues of $192.5 million topped the consensus estimate by 0.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inspire Medical Systems has an estimated earnings growth rate of 51.4% in 2024 compared with the industry’s 19.4%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 353.6%.

Transmedics Group, sporting a Zacks Rank #1, reported a fourth-quarter 2024 EPS of 12 cents compared to the Zacks Consensus Estimate of a loss of 8 cents per share. Revenues of $81.2 million outpaced the Zacks Consensus Estimate by 18.9%.

TMDX has an estimated 2024 earnings growth rate of 81.8% compared to the industry’s 14.6%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 107.8%.

Exact Sciences, carrying a Zacks Rank #2, reported a fourth-quarter 2024 loss of 27 cents per share, narrower than the Zacks Consensus Estimate of a loss of 53 cents. Revenues of $646.9 million topped the Zacks Consensus Estimate by 2.4%.

EXAS has an estimated earnings growth rate of 23.9% in 2024 compared with the industry’s 13% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 51.5%.

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