LabCorp's Strong Organic Growth Boosts 1Q16 Revenue Growth
Guidance for 2016
In its 1Q16 conference call, Laboratory Corporation of America (LH) updated its 2016 year-over-year (or YoY) revenue growth rate guidance to the range of 8.5%–10%. This is higher than the previously projected revenue growth rate range of 7.5%–9.5%.
The updated revenue growth rate guidance also includes the impact of about -0.4% due to unfavorable currency fluctuations. The improvement in the updated guidance is the result of strong organic growth coupled with a 0.6% impact of currency fluctuations, which was better than expected.
The company also updated its 2016 guidance for adjusted earnings per share (or EPS) from the range of $8.45–$8.85 to the range of $8.55–$8.95.
Wall Street analysts expect LabCorp (LH) to earn revenues of about $9.3 billion in 2016, which is a YoY increase of about 7.7%. If the company manages to reach its projected revenue growth rate in 2016, beating analyst expectations, it may boost LabCorp’s share price, as well as those of the iShares Russell Mid-Cap ETF (IWR). LabCorp makes up about 0.21% of IWR’s total portfolio holdings.
Analysts have also projected that in 2016, Quest Diagnostics (DGX), Opko Health (OPK), and Idexx Laboratories (IDXX) could earn revenues of around $7.5 billion, $1.1 billion, and $1.7 billion, respectively.
Despite the impact of about -0.2% from currency fluctuations, LabCorp has updated its YoY revenue growth rate guidance for 2016 for its LabCorp Diagnostic segment from the range of 3.5%–5.5% to the new range of 4%–5.5%.
Additionally, the company has initiated Project Launchpad for its re-engineering processes and improving its consumer experience. This project is expected to generate cost savings and boost the long-term profit margins of the LabCorp Diagnostic segment. Covance Drug Development is also expected to witness YoY revenue growth of about 6%–9% in 2016, despite the impact of about -0.5% due to currency fluctuations.
The combined clinical and laboratory expertise of Covance Drug Development and LabCorp Diagnostic is expected to be a key driver of LabCorp’s sustained revenue growth going forward.
Browse this series on Market Realist: