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 company said.
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 earlier.
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 items.
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 shares.