(Reuters) - Laboratory Corp of America Holdings (LH.N) posted a quarterly profit on Wednesday that beat analysts’ estimates, helped by higher demand at the unit performing clinical trials for drugmakers, and prompting the company to raise its full-year revenue target.
The company’s Covance unit, which has been steadily improving, hit $1 billion in sales for the first time, benefiting from the acquisition of privately held CRO Chiltern International.
Covance sales rose 39.3 percent to $1.08 billion, better than consensus estimates of $1.02 billion by Evercore ISI.
LabCorp has been acquiring contract research organizations as drugmakers try to cut costs by outsourcing clinical trials.
“It is reassuring to see Covance pivot to growth after 1H17 declines, and that the Chiltern integration appears to be going smoothly,” Barclays analysts said in a research note.
The company’s shares were up 3.4 percent at $171.79.
LabCorp is also focusing on expanding partnerships. It has an ongoing collaboration with Walgreens Boots Alliance (WBA.O), where it has patient service centers within Walgreens stores.
“We expect the partnership with Walgreens to expand both in number of stores and scope over the balance of 2018,” Chief Executive Officer David King said on a conference call with analysts.
Revenue from its diagnostics unit, which offers services such as genetic and pathology tests through labs throughout the United States, rose 8 percent to $1.64 billion in the quarter.
“In diagnostics, our focus on women’s health and medical drug monitoring as well as our strategic collaboration with 23andMe contributed to organic growth,” King said.
LabCorp provides its testing services to 23andMe, a Mountain View, California-based genetic testing company.
The diagnostics testing company raised its 2018 net revenue growth forecast to 10-12 percent from 9.5-11.5 percent. LabCorp reiterated its earnings forecast of $11.30 to $11.70 per share.
Net earnings attributable to LabCorp was $173.2 million, or $1.67 per share, in the first quarter ended March 31, compared with $183 million, or $1.75 per share, a year earlier.
Excluding items, the company earned $2.78 per share. Analysts on average had estimated $2.63 per share, according to Thomson Reuters I/B/E/S.
Net revenue rose 18 percent to $2.85 billion, which also beat analysts’ estimates of $2.77 billion.
Last week, Quest Diagnostics (DGX.N) also reported a better-than-expected first quarter earnings, citing benefits of tax reform.
Reporting by Akankshita Mukhopadhyay and Anuron Kumar Mitra in Bengaluru; Editing by Anil D'Silva and Shailesh Kuber