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Diagnostics power LabCorp's beat-and-raise quarter
October 25, 2017 / 11:14 AM / a month ago

Diagnostics power LabCorp's beat-and-raise quarter

(Reuters) - Laboratory Corp of America Holdings’ (LH.N) profit topped analysts’ estimates and the company raised its full-year revenue growth forecast on Wednesday, expecting growth from its diagnostics business.

Analysts said LabCorp had a stellar quarter with both its diagnostics services unit and contract research organization (CRO) Covance business bringing in strong sales.

Pharmaceutical companies have been trying to cut costs, reduce clinical trial times and expand their research and development presence, leading to a string of consolidations within the CRO industry.

Revenue from LabCorp’s diagnostics jumped 10 percent to $1.84 billion in the quarter, driven by acquisitions and a rise in same-store volume growth, despite the impact of hurricanes.

The unit, which accounted for about 70 percent of LabCorp’s total revenue, offers services such as genetic and pathology tests through labs throughout the United States.

Sales in the Covance business, which carries out trials for drugmakers, rose 8.6 percent, helped by the acquisition of privately held CRO Chiltern International.

The Burlington, North Carolina-based company’s shares were trading up 2.3 percent at $154.38.

On a call with analysts, Chief Executive David King said proposed new reimbursement rates for clinical lab tests could hurt LabCorp’s earnings, but expected this to be offset by continued strength from both its units.

The Centers for Medicare and Medicaid Services proposed a draft for Medicare reimbursement rates for clinical lab tests last month, sparking speculation that LabCorp and peer Quest Diagnostics Inc (DGX.N) could be immediate “losers” from the new rates.

Last week, Quest Diagnostics lowered its full-year adjusted earnings forecast, citing the impact of hurricanes in Florida and Texas, as well as disruptions from Hurricane Maria in Puerto Rico.

BEAT-AND-RAISE QUARTER

Net earnings attributable to LabCorp rose to $180.6 million, or $1.74 per share, in the third quarter ended Sept. 30, from $179.5 million, or $1.71 per share, a year ago.

Net revenue rose 10 percent to $2.66 billion.

The company earned $2.46 per share, excluding items. Analysts on average had estimated earnings per share of $2.40, according to Thomson Reuters I/B/E/S.

LabCorp raised its full-year forecast for net revenue growth to 8-8.5 percent from 5-6.5 percent.

The company also raised the bottom end of its adjusted earnings forecast range to $9.40 from $9.30, but lowered the top end to $9.60 from $9.65.

Reporting by Manas Mishra in Bengaluru; Editing by Martina D'Couto

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