Labcorp Q3 2024 Earnings Call: Growth and Strategic Advancements Revealed
In its third-quarter 2024 earnings call, Labcorp Holdings (LH) reported a 7% year-over-year increase in revenue, reaching $3.3 billion. The company observed a 9% growth in diagnostic revenue and a 3% rise in biopharma laboratory services. Adjusted earnings per share (EPS) rose by 4% to $3.50. Despite the impact of Hurricanes Helene and Milton, Labcorp presented a positive outlook, supported by strategic acquisitions and the launch of new products. Adjustments in operating income and margin were noted, alongside a strong business development pipeline and expected savings from the LaunchPad initiative.
Key Highlights Labcorp's Q3 revenue increased to $3.3 billion, marking a 7% rise from the previous year. Adjusted EPS increased by 4% to $3.50, with diagnostics and biopharma services contributing to growth. The company carried out acquisitions and launched new products, including the PGDx elio plasma focus Dx liquid biopsy test. Adjusted operating income was $441 million, with margin decline primarily due to the Invitae acquisition. Labcorp expects to save $100 million to $125 million from the LaunchPad initiative and forecasts capital expenditures to remain around 3.5% of revenue. The company remains optimistic about future growth, with a positive outlook for the diagnostics and biopharma segments.
Company Outlook Labcorp forecasts corporate revenue growth of 6.6% to 7.3% for 2024. Adjusted EPS guidance is set between $14.30 and $14.70, with a slight decrease affected by weather conditions. Free cash flow projections range from $850 million to $980 million. The long-term growth rate for the biopharma segment is approximately 6%.
Negative Highlights The company reported a 40 basis point decline in adjusted operating margin, primarily due to the Invitae acquisition. Hurricanes Helene and Milton impacted operations and contributed to margin pressures.
Positive Highlights Diagnostic Laboratories revenue increased by 8.9% to $2.6 billion, driven by organic growth and acquisitions. Biopharma Laboratory Services revenue rose by 2.6% to $738 million, with an $8.1 billion order backlog. The company expects margin improvements in the second half of next year following the integration of Invitae.
Shortcomings The adjusted tax rate decreased from 24% to 22.8% from the previous year. Net income from continuing operations was reported at $170 million, equating to $2 per diluted share.
Q&A Highlights Executives discussed the positive impact of the Invitae acquisition and its expected contribution to revenue and margins. The company is prepared to manage potential disruptions from Walgreens' closure of certain locations. Labcorp focuses on acquisitions that are profitable in the first year and recover capital costs within two to three years.
In conclusion, Labcorp's third-quarter earnings call portrayed a company that successfully manages challenges and leverages strategic initiatives to support growth. With a focus on expanding laboratory capacities, particularly in rural areas, and integrating new acquisitions like Invitae, Labcorp is charting a path for continued expansion and strong financial performance. Company management expressed confidence in maintaining growth momentum and improving margins, backed by a strong business development pipeline and the ongoing success of the LaunchPad initiative. As Labcorp advances, it remains committed to delivering shareholder value and supporting the communities it serves despite natural disasters and market fluctuations.
InvestingPro Forecasts Labcorp's strong third-quarter performance aligns with several key forecasts from InvestingPro. The company's 7% revenue increase to $3.3 billion and 4% rise in adjusted EPS to $3.50 reflect its strong financial health. According to InvestingPro data, Labcorp's revenue for the trailing twelve months, as of the second quarter of 2024, amounted to $12.49 billion, showing a healthy revenue growth of 5.22%. This growth trend is consistent with the company's third-quarter results and projected corporate revenue growth of 6.6% to 7.3% for 2024.
An InvestingPro Tip highlights that Labcorp's net income is expected to increase this year, confirming the company's positive outlook and ability to maintain profitability despite challenges such as hurricane impacts. This growth expectation is also supported by the company's adjusted EPS guidance of $14.30 to $14.70 for 2024.
Another relevant InvestingPro Tip notes that Labcorp is trading close to its 52-week high, with the stock price at 96.06% of its 52-week high. This indicates investor confidence in the company's performance and future prospects, aligned with the positive highlights from the earnings call, such as strong growth in Diagnostic Laboratories revenue and a robust order backlog in Biopharma Laboratory Services.
InvestingPro provides 11 additional tips for Labcorp, offering investors a more comprehensive analysis of the company's financial health and market position. The company's market capitalization of $18.46 billion reflects its significant presence in the Healthcare Providers & Services sector. With a price-to-earnings (adjusted) ratio of 24.13 for the last twelve months as of the second quarter of 2024, Labcorp's valuation appears consistent with its growth expectations and sector position.
These InvestingPro forecasts complement the earnings call report, providing investors with a broader perspective on Labcorp's financial performance and market position.