LabCorp (LH) to Report Q3 Earnings: What's in the Offing?

·6 min read

Laboratory Corporation of America Holdings LH, also known as LabCorp, is slated to report third-quarter 2021 results on Oct 28, before market open.

In the last reported quarter, the company’s adjusted earnings of $6.13 exceeded the Zacks Consensus Estimate by 8.69%. The company beat estimates in each of the trailing four quarters, the average surprise being 29.73%.

Factors at Play

LabCorp seems to be well poised on its three key strategies — delivering advanced diagnostics, bringing new medicines to patients faster and using technology to improve patient care.

Over the past few months, the company has been witnessing continued sales rebound in the volumes of base testing. The company’s third-quarter base-business performance is expected to have registered a faster recovery rate compared to the second quarter as patients and providers returned to routine healthcare checkups and pharmaceutical clients resumed their important research activities at a fast pace.

Due to extensive vaccine rollout programs and a drop in case count, the company’s COVID-19 testing services wing registered a decline in volume in Q2. However, the Q3 numbers might be stronger given an increase in cases during July-August due to the emergence of the new variant of SARS-CoV-2 across the nation.

Laboratory Corporation of America Holdings Price and EPS Surprise

Laboratory Corporation of America Holdings Price and EPS Surprise
Laboratory Corporation of America Holdings Price and EPS Surprise

Laboratory Corporation of America Holdings price-eps-surprise | Laboratory Corporation of America Holdings Quote

Covance Drug Development third-quarter results are expected to reflect an increase in organic revenues on base business growth and contribution from COVID testing performed through the central lab business. Like the last-reported quarter, the company is expected to have registered broad-based revenue growth, including in COVID vaccine and therapeutic studies.

In the United States, over the past few months, the company has been working to improve patients' experience in service centers, focusing on efforts to create a seamless digital journey from appointment scheduling to result delivery. Per the July update, the company noted an average of three million patients served in a given week. This trend in digital channel is expected to have continued through the rest of Q3, contributing to the top line.

In women’s health, in August, the company acquired Ovia Health, a digital health platform used by millions of women seeking information and support on family planning, pregnancy and parenting. This is expected to have contributed to the company’s Q3 top line.

In oncology, the company has made significant strides in recent times such as launching several new oncology tests, including OmniSeq INSIGHT, a pan-cancer tissue-based sequencing test for patients with advanced solid tumor cancers. In July, LabCorp announced the availability of therascreen KRAS PCR Mutation Analysis, a companion diagnostic to identify patients with non-small cell lung cancer (NSCLC) who are eligible for treatment with LUMAKRAS (sotorasib), a new treatment option developed by Amgen. Again in August, the company announced collaboration with Community Clinical Oncology Research Network to better understand the impact of disparities in precision medicine for people with cancer. All these developments are expected to have positively contributed to the company’s oncology arm in Q3.

Further, the company’s recently-completed acquisition of Myriad Genetics’ autoimmune business unit, including the Vectra rheumatoid arthritis (RA) assay is likely to have partly contributed to the to-be-reported quarter’s top line.

Starting from June, the company’s Pixel by Labcorp COVID-19 PCR Test Home Collection Kit is available at 6,000 Walgreens stores nationwide and through Walgreens collaborations with on-demand delivery services like DoorDash and Instacart. This is expected to have contributed to the company’s Q3 performance. Strong execution of LaunchPad savings might have improved Q3 margin.

The Zacks Consensus Estimate for Covance Drug Development segment’s Q3 revenues is pegged at $1.39 billion, indicating a rise of 12.5% from the prior-year quarter’s figure.

Within LabCorp Diagnostics, in the third quarter, growing demand for COVID-19 testing is expected to have positively impacted the volume scenario compared to Q2. According to the company, July onward, testing started to increase again on Delta variant spike.

Meanwhile, the company’s extended agreement with BML to further the development of companion diagnostics in Japan might have contributed to the growth. The LaunchPad initiative for Diagnostics too is expected to have contributed to the company’s Q3 margin.

Meanwhile, the Zacks Consensus Estimate for LabCorp Diagnostics’ Q3 revenues is pegged at $2.2 billion, suggesting an 18.8% plunge from the year-ago quarter’s reported figure.

Key Q3 Estimates

The Zacks Consensus Estimate for third-quarter earnings of $4.77 per share implies a 43.3% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $3.58 billion, also suggesting 8.2% fall from the prior-year reported number.

What Our Quantitative Model Suggests

Per our proven model, stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a good chance of beating estimates. This is exactly the case as you can see:

Earnings ESP: LabCorp has an Earnings ESP of +27.39%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: LabCorp currently carries a Zacks Rank #2.

Other Stocks Worth a Look

Here are a few medical stocks worth considering as these too have the right combination of elements to beat on earnings this time around.

Regeneron Pharmaceuticals, Inc. REGN currently has an Earnings ESP of +11.43% and a Zacks Rank #1. The stock is slated to release its third-quarter 2021 results on Nov 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pulmonx Corporation LUNG has an Earnings ESP of +2.04% and a Zacks Rank of 2, at present. The stock is expected to release its third-quarter 2021 results on Nov 9.

TScan Therapeutics, Inc. TCRX has an Earnings ESP of +13.66% and a Zacks Rank of 2, at present. The company is scheduled to release its third-quarter 2021 results on Nov 18.


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