Labcorp (LH) to Report Q3 Earnings: What's in the Cards?
Laboratory Corporation of America Holdings LH, or Labcorp, is slated to report third-quarter 2023 results on Oct 26 before market open.
In the last reported quarter, the company’s adjusted earnings of $3.42 missed the Zacks Consensus Estimate by 1.44%. The company missed estimates in three of the trailing four quarters and surpassed in one, the average negative surprise being 1.09%.
Factors at Play
Similar to the past few quarters, Labcorp is expected to have witnessed a significant reduction in COVID-19 PCR and antibody testing. This is likely to have hampered Labcorp’s overall sales performance in the to-be-reported quarter. The company expects testing revenues to decline 85%-89% in the third quarter compared to the reported figure in 2022.
However, the legacy Diagnostics Laboratories business is expected to have witnessed an improved performance, driven by strong base business volumes. The Ascension lab management agreement may have also contributed to the organic growth of the business.
Labcorp Price and EPS Surprise
Labcorp price-eps-surprise | Labcorp Quote
At the end of the second quarter, Labcorp successfully completed the spinoff of its CDCS business, giving rise to two separate independent, publicly traded companies. Fortrea’s spinoff has brought the growth opportunities of Labcorp’s laboratory businesses into full focus. In the third quarter of 2023, the Biopharma Laboratory Services segment is likely to have benefited from the continued industry leadership in the central lab business.
Earlier in April, the company enhanced its central laboratory presence and drug development capabilities in Japan by expanding CB Trial Laboratory, co-managed by Labcorp and BML, a leading Japanese provider of clinical laboratory testing services. Labcorp also opened a new kit production facility in Suzhou and an expanded immunology and immunotoxicology lab in China. These additional footprints are likely to have helped harness the country’s drug development capabilities and eventually benefited LH’s results of operations in the third quarter.
Meanwhile, Labcorp’s pipeline of potential hospital and local laboratory acquisitions is robust. The company has established strategic collaborations with a range of local and regional health systems to enhance laboratory services for patients and providers. The partnership with Jefferson Health — one of the largest health systems serving the Greater Philadelphia area in Southern New Jersey — will focus on future research and innovations to improve health outcomes.
Earlier in July, Labcorp completed the acquisition of certain assets of Enzo Biochem, Inc.’s clinical laboratory division in New Jersey. In Eastern Massachusetts, Labcorp recently expanded diagnostic testing and laboratory services via an agreement with the leading integrated academic health system, Tufts Medicine. We expect all these developments to have positively contributed to Labcorp’s revenues in the third quarter of 2023.
LH is also capitalizing on innovation and technology that supports diagnostic and drug development testing across disease areas, including cancer, Alzheimer’s and other diseases. The launch of the Labcorp Plasma Focus biopsy test has been a critical step in expanding the company’s suite of precision oncology tests. Further, the portfolio of solutions, which the company offers through the acquisition of Personal Genome Diagnostics (PGDx), is expected to continue gaining momentum with major health systems and academic centers in the third quarter of 2023.
Labcorp also offers many of its innovative tests online nationwide through its digital health platform, Labcorp OnDemand. In the second quarter, the company launched an advanced e-commerce platform to improve consumer engagement with the company. We expect Labcorp to continue delivering impactful digital solutions to its customers, aiding business growth in the to-be-reported quarter.
For the third quarter of 2023, our model projects revenues from the Diagnostics Laboratories segment to grow 2.3% year over year to $2.26 billion. The Biopharma Laboratory Services is expected to report revenues of $731.9 million, suggesting an increase of 9.8%.
Q3 Estimates
The Zacks Consensus Estimate for LH’s third-quarter 2023 revenues is pegged at $2.99 billion. This suggests a 17% fall from the year-ago reported figure.
The Zacks Consensus Estimate for its third-quarter 2023 EPS of $3.50 indicates a year-over-year decrease of 25.2%
What Our Model Suggests
Per our proven model, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, have a higher chance of beating estimates. However, that is not the case here, as you can see below:
Earnings ESP: Labcorp has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter:
Insulet PODD has an Earnings ESP of +6.61% and a Zacks Rank #2. The company will release third-quarter 2023 results on Nov 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Insulet has a long-term expected earnings growth rate of 35.7%. PODD has an earnings yield of 1.13% against the industry’s -2.58%.
Acadia Pharmaceuticals ACAD has an Earnings ESP of +6.76% and a Zacks Rank #2. The company is scheduled to release third-quarter 2023 results on Nov 2.
ACAD has an expected long-term earnings growth rate of 43.4%. In the trailing four quarters, the company delivered an average earnings surprise of 20.33%.
Dentsply Sirona XRAY currently has an Earnings ESP of +1.85% and a Zacks Rank #2. The company is scheduled to release its third-quarter 2023 results on Nov 2.
Dentsply Sirona has an expected earnings growth rate of 14.7% for the next year. XRAY’s earnings beat estimates in three of the trailing four quarters, the average surprise being 12.51%.
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