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Laboratory Corporation of America’s Guidance for 2016

Margaret Patrick

LabCorp's Strong Organic Growth Boosts 1Q16 Revenue Growth

(Continued from Prior Part)

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.

Segment guidance

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.

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