By Caroline Humer
Feb 8 Diagnostics testing company Laboratory
Corp of America Holdings reported a drop in
fourth-quarter profit on Friday and said bad weather,
particularly Superstorm Sandy, was partly to blame.
The storm hurt sales volume during the quarter by about one
percentage point and lowered earnings per share by 9 cents, the
LabCorp said it experienced promising volume growth during
the quarter that lead it to forecast a 2 to 3 percent higher
revenue in 2013.
Chief Executive David King said during a conference that
earnings would also be higher next year but tempered by
expectations for a large decline in reimbursements for medical
tests from the government.
The fourth-quarter earnings and the profit outlook fell
short of Wall Street estimates and shares fell 2.2 percent, or
$2.01, to $89.62 in morning New York Stock Exchange trading.
The government has cut payments for lab tests as part of
efforts to stem the rise in healthcare spending. As use of
medical services has fallen during the past few years with the
economic downturn, Lab Corp and competitors have also been hurt.
King said that an expected reduction in payments from
Medicare of about 35 cents per share in 2013 would be offset a
bit by an increase in payments from other payers, such as
insurance companies who pay for private insurance.
The company's earnings were helped also by its acquisition
of clinical trial testing company Medtox Scientific, which
closed in August and added an estimated $30 million to revenues,
Leerink Swann analyst Jason Gurda said in a research note.
LabCorp said net income was $120.2 million, or $1.26 per
share, down from $135.4 million, or $1.34 per share, a year
Earnings excluding amortization related to the end of a
licensing agreement, restructuring costs and other charges came
to $1.54 a share. The result would have been 9 cents per share
higher if not for "inclement weather," the company said. In the
fall, Superstorm Sandy shut transportation systems and destroyed
thousands of homes and businesses in the Northeast.
Analysts had expected fourth-quarter earnings of $1.62 per
share, according to Thomson Reuters I/B/E/S.
Lab Corp and Quest Diagnostics Inc, the No. 1 U.S.
laboratory testing company, are also facing competition as
hospitals buy physician groups, which order tests from their own
labs rather than private vendors. Quest announced earnings last
month that missed expectations and also gave a weak outlook.
The changing payment environment is part of healthcare
reform, which is introducing new repayment methods for hospitals
and doctors as well as various taxes on the medical industry to
help pay for the 30 million more people expected to have
insurance under the Affordable Care Act.
King said he believes the health exchanges and the Medicaid
expansion will increase testing volume even though the pricing
will be difficult.
"I think reform will be a net positive to us," King said.
Lab Corp said revenue was $1.4 billion, in line with
analyst consensus estimates for fourth-quarter revenue of $1.39
billion, according to Thomson Reuters I/B/E/S.
The company said 2013 revenues would rise 2 percent to 3
percent and also projected an increase in earnings per share
from 2012, when it reported profit of $6.82 per share excluding
For 2013, Lab Corp said it expects earnings of $6.85 per
share to $7.15 per share, excluding items, but
Analysts had expected 2013 earnings of $7.26 per share,
according to Thomson Reuters I/B/E/S.
The company also said that it would buy back $1 billion in