* Fourth-quarter net EPS $1.08 vs 98 cents year earlier
* Extends contract with Wellpoint through mid-2013
* Shares advance 2.5 percent (Adds conference call, analyst comment, details throughout, byline, updates stock price)
By Debra Sherman
CHICAGO, Feb 12 (Reuters) - Laboratory Corp of America (LH.N) reported a 3.2 percent rise in quarterly net earnings on Thursday, as increased volume of high-priced, sophisticated medical tests outweighed a sharp drop in the volume of substance abuse tests.
Shares of the No. 2 U.S. provider of medical testing services advanced 2.5 percent in early New York Stock Exchange trade as the broad market faltered amid continued concerns about the economy.
“LabCorp still expects earnings to be up this year. How many companies can you say that about? It’s not immune to the economy, but it is resistant,” said Leerink Swann analyst Jason Gurda.
Management told a conference call the company extended its contract with Wellpoint Inc WLP.N through mid-2013 and that there were no national contracts up for renewal in 2009.
The company, which ranks behind Quest Diagnostics Inc (DGX.N), still expects 2009 revenue growth of 2 percent to 4 percent and diluted earnings per share of $4.75 to $4.95, excluding the impact of stock repurchases.
Last month, Labcorp cut its outlook, citing a deteriorating economy and tighter hospital spending. LabCorp had forecast 2009 earnings of $5 to $5.25 per share and revenue growth of 3.5 percent to 5.5 percent.
Management said bad debt was stable, but no one was predicting a reduction in bad debt in 2009.
Tests for abused drugs are expected to continue to be a drag in 2009, they said, though the volume of so-called esoteric tests, complex diagnostic tests that require sophisticated technology, are expected to remain strong.
In the fourth quarter, net profit rose to $118.1 million, or $1.08 per share, from $114.4 million, or 98 cents per share, a year earlier.
Excluding restructuring and other items, the company earned $1.10 a share. On that basis, the average expectation on Wall Street was for a profit of $1.09, according to Reuters Estimates.
Fourth-quarter revenue rose 11.3 percent to $1.12 billion.
The company reiterated its long-term goal of achieving $100 million in annualized cost savings, which assumes an improvement in bad debt in 2010, LabCorp said.
For 2009, savings will likely be less than the $35 million it originally forecast, partly because bad debt isn’t likely to improve, the company told the conference call.
Savings in 2010 will be generated by facility closings, more automation in its laboratories, improvement in information technology, as well as a reduction in bad debt.
Shares of Labcorp were up $1.50 to $61.25 on the New York Stock Exchange. They have traded between $52.93 and $80.77 during the past 52 weeks. (Reporting by Debra Sherman; Editing by Lisa Von Ahn and Jeffrey Benkoe)