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    Labcorp Holdings Inc (LH)

    CFO Change
    Board Change
    New Share Buyback Program

    Business Description

    Labcorp is a global leader in laboratory services, operating through two main segments: Diagnostics Laboratories (Dx) and Biopharma Laboratory Services (BLS) . The company provides a wide range of laboratory testing services, including routine and specialty/esoteric testing, and is heavily involved in the development of new drugs, having worked on 90% of the new drugs approved by the FDA in 2023 . Labcorp's strategic focus includes expanding its specialty testing capabilities in areas such as oncology, women's health, autoimmunology, and neurology .

    1. Diagnostics Laboratories (Dx) - Offers routine and specialty/esoteric testing services, with nearly all revenues generated in the U.S. This segment is a major contributor to the company's revenue .
    2. Biopharma Laboratory Services (BLS) - Focuses on early development research laboratories and central laboratory services, with revenues nearly evenly split between the U.S. and other countries .

    Q3 2024 Summary

    Initial Price$204.52July 1, 2024
    Final Price$219.20October 1, 2024
    Price Change$14.68
    % Change+7.18%

    What went well

    • Integration of Invitae is going extremely well, and it's expected to be slightly accretive to earnings in 2025 with revenue growth of approximately 10% .
    • Oncology offerings are growing faster than the overall diagnostics business, with esoteric testing outpacing routine testing, making it a significant area of focus for future growth .
    • Increased inorganic growth expectations from 1-2% to 1.5-2.5% in the long-term guidance, reflecting confidence in a strong M&A pipeline, particularly in hospital and regional laboratories .

    What went wrong

    • The acquisition of Invitae is negatively impacting margins, causing a 40 basis point margin reduction this year and expected to continue showing negative year-over-year margin comparisons through the first half of next year until integration is complete.
    • LabCorp's consumer business, Labcorp OnDemand, lacks critical mass and is not contributing material revenue at this time, suggesting limited impact on financial performance in the near term.
    • In the competitive hereditary testing market, LabCorp expects revenue growth from the Invitae acquisition to be approximately 10%, which matches market growth and may indicate challenges in gaining market share beyond industry averages.

    Q&A Summary

    1. Margin Outlook
      Q: How are margins progressing and expectations for next year?
      A: Management highlighted that despite headwinds from the Invitae acquisition, weather impacts, and unfavorable payroll days totaling 210 basis points , underlying margins improved by 80 basis points. They expect these headwinds to become tailwinds next year, boosting margins further. LaunchPad initiatives are on track to deliver $100–$125 million in savings , helping offset wage inflation.

    2. Invitae Acquisition Impact
      Q: What is the impact of Invitae on margins and growth?
      A: The Invitae acquisition negatively impacted margins by 40 basis points this year. Management expects Invitae to be slightly accretive next year , with revenue growth of about 10%. Integration is progressing well, and margins will improve each quarter, turning positive in the second half of next year.

    3. Early Development Business Outlook
      Q: How is the early development business expected to perform?
      A: Early Development showed sequential revenue growth in Q3 , and management expects positive year-over-year growth in Q4. With a soft comp last year and solid backlog execution, they anticipate continued growth into 2025, contributing to margin improvement.

    4. Managed Care Contracts
      Q: How are payer relationships and pricing environment?
      A: Management feels very good about managed care contracts, securing renewals on good terms. Overall, they expect a neutral to slightly positive impact moving forward, which is better than historical trends. Nonexclusive contracts are preferred, allowing competitive positioning without significant downside.

    5. Inorganic Growth and M&A Pipeline
      Q: What are expectations for inorganic growth and M&A?
      A: The company increased its inorganic growth expectations from 1–2% to 1.5–2.5% in their long-term guidance. The M&A pipeline is robust, focusing on hospital, local, and regional laboratories that are accretive in the first year. Management is optimistic about future deals contributing to growth.

    6. PAMA Impact Deferred
      Q: How does PAMA delay affect long-term guidance?
      A: While PAMA impacts have been postponed, management still includes it in their long-term guidance but notes that further delays could positively affect margins and revenue. They remain confident in their ranges despite this potential upside.

    7. Debt Refinancing and Interest Expense
      Q: What are expectations for interest expense after refinancing?
      A: The company completed refinancing, raising $2 billion of debt with better-than-expected pricing. Interest expense is expected to be slightly favorable compared to previous forecasts of $210 million this year and $240 million next year.

    8. Diagnostics Utilization Trends
      Q: How are current utilization trends in Diagnostics?
      A: Diagnostics utilization is accelerating, with volume up 2.7% despite weather constraints. The company expects continued momentum, with organic revenue growth of 2.5–4.5% and increased inorganic growth. They are gaining market share through hospital deals and regional labs.

    9. Oncology Testing Growth
      Q: How is the oncology testing business performing?
      A: The oncology portfolio is growing faster than routine testing, driven by both basic and esoteric tests. Management expects this franchise to continue outpacing overall diagnostics growth, leveraging their comprehensive test offerings.

    10. LaunchPad Savings
      Q: Are LaunchPad savings offsetting inflationary pressures?
      A: LaunchPad initiatives are effectively offsetting wage inflation. The company is on track to achieve $100–$125 million in savings , comparable to a 3% merit increase , helping manage personnel costs despite competitive labor markets.

    11. Walgreens Partnership Impact
      Q: How will Walgreens store closures affect Labcorp?
      A: Labcorp maintains a strong relationship with Walgreens, operating about 400 patient service centers in their stores. While store closures may occur, they expect minimal impact as they can relocate centers to other stores or standalone sites. The initial site selection was strategic, focusing on high-volume locations.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Dx2,382.82,340.82,344.72,346.89,415.12,479.72,524.92,553.5
    BLS-699.0719.1-2,774.2710.9707.0737.7
    DD1,401.3-------
    - Reimbursable Out-of-Pocket Expenses--------
    Intercompany Eliminations-6.2-6.1-7.0-8.4-27.7-14.0-11.0-9.2
    Other--------
    Total Revenue3,777.93,033.73,056.82,293.212,161.63,176.63,220.93,282.0
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    North America-2,637.12,650.4-10,177.72,654.62,698.82,738.4
    - United States2,959.2-2,550.6-----
    - Canada--------
    Europe453.3273.0275.193.11,094.5285.9289.9295.4
    - United Kingdom--------
    - Switzerland--------
    - Other Europe--------
    Other Regions265.4123.6131.3-33.9486.4126.1129.2148.2
    Total Revenue3,777.93,033.73,056.82,293.212,161.63,176.63,220.93,282.0

    Executive Team

    NamePositionStart DateShort Bio
    Adam H. SchechterPresident and Chief Executive OfficerNovember 2019Adam H. Schechter has served as a director of Labcorp since April 2013. He became the President and CEO in November 2019 and Chairman of the Board in May 2020. Previously, he held leadership roles at Merck & Co., Inc. .
    Glenn A. EisenbergExecutive Vice President and Chief Financial OfficerJune 2014Glenn A. Eisenberg has served as EVP and CFO since June 2014. He will transition to Special Advisor to the CEO on December 2, 2024, until his retirement on April 30, 2025 .
    Megan D. BaileyExecutive Vice President and Chief Strategy and Transformation OfficerMay 2023Megan D. Bailey has served in her current role since May 2023. Previously, she was Chief of Staff to the CEO and an Executive Committee member starting in July 2022. She was CEO of Personal Genome Diagnostics from April 2020 to July 2022 .
    Lance V. BerberianExecutive Vice President and Chief Information and Technology OfficerFebruary 15, 2020Lance V. Berberian has served as EVP and Chief Information and Technology Officer since February 2020. Previously, he was Senior Vice President and Chief Information Officer from February 2014 .
    Brian J. CaveneyExecutive Vice President and President, Early Development Research Laboratories and Chief Medical and Scientific OfficerMay 2023Brian J. Caveney has held his current position since May 2023. He joined Labcorp in September 2017 as Senior Vice President and Chief Medical Officer .
    Anita Z. GrahamExecutive Vice President and Chief Human Resources OfficerApril 2023Anita Z. Graham has served as EVP and Chief Human Resources Officer since April 2023. Previously, she held senior HR roles at VF Corporation, ADT Corporation, and Shire plc .
    Mark S. SchroederExecutive Vice President and President, Diagnostics Laboratories and Chief Operations OfficerMay 2023Mark S. Schroeder has served in his current role since May 2023. He joined Labcorp in May 2007 and has held various leadership positions, including Chief Supply Chain Officer .
    Amy B. SummyExecutive Vice President and Chief Marketing OfficerMarch 2, 2020Amy B. Summy has served as EVP and Chief Marketing Officer since March 2020. Previously, she was a Partner and Marketing & Insights Practice Leader at Ernst & Young LLP .
    Sandra D. van der VaartExecutive Vice President, Chief Legal Officer, Chief Compliance Officer, and Corporate SecretaryFebruary 2020Sandra D. van der Vaart has served in her current role since February 2020. She has held various positions within Labcorp's legal department since January 2001 .
    Peter J. WilkinsonSenior Vice President and Chief Accounting OfficerApril 2019Peter J. Wilkinson has served as SVP and Chief Accounting Officer since April 2019. Previously, he held positions such as EVP and CFO of Syneos Health, Inc.'s clinical division .
    Julia WangExecutive Vice President and Chief Financial OfficerDecember 2, 2024Julia Wang was appointed as EVP and CFO effective December 2, 2024. She previously served as CFO at BeiGene, Ltd. and held leadership roles at Alexion Pharmaceuticals, Quest Diagnostics, and Johnson & Johnson .

    Questions to Ask Management

    1. Given the substantial growth of Labcorp OnDemand but its current immaterial impact on revenue, when do you anticipate this platform reaching a scale significant enough to break out its financials, and what are the main obstacles to achieving that critical mass?

    2. With Walgreens planning to close numerous stores and considering you have about 400 patient service centers within their locations, how do you intend to mitigate the potential impact on patient access and volumes, and what strategies are in place to ensure continuity of services in affected areas?

    3. The acquisition of Invitae has resulted in a margin decline this quarter, with expectations of slight earnings accretion only in 2025; can you elaborate on the integration challenges you're facing and how confident are you in achieving the projected top-line growth and margin improvement?

    4. You've mentioned ongoing strain in the employer testing-related business with no significant positive outlook for 2025; what strategic actions are you taking to address this underperforming segment, and is divestiture being considered to improve overall business performance?

    5. Despite underlying improvements, adjusted operating margins in the Diagnostics segment were negatively impacted by Invitae, weather, and calendar days; how sustainable are your margin improvement initiatives, and what measures are you implementing to mitigate such external factors affecting your profitability?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateJuly 24, 2024
    End Date/DurationNo expiration date
    Total additional amount$1,000.0 million
    Remaining authorization amount$1,355.4 million as of September 30, 2024
    DetailsPart of strategy to return capital to shareholders, following Fortrea spin-off

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Enterprise Revenue Growth: Expected to grow 6.6% to 7.3% compared to 2023 .
      2. Diagnostics Revenue Growth: Expected to be up 7.2% to 7.8% compared to 2023 .
      3. Biopharma Revenue Growth: Expected to grow 4.7% to 5.6% compared to 2023 .
      4. Adjusted EPS: Guidance range is $14.30 to $14.70 .
      5. Free Cash Flow: Guidance range is $850 million to $980 million .
      6. Enterprise Margins: Expected to be slightly down year-over-year .
      7. Capital Expenditures: Expected to be approximately 3.5% of revenue for the full year .
      8. Adjusted Tax Rate: Expected to be approximately 23% for the full year .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Adjusted EPS: Guidance range is $14.30 to $14.90 .
      2. Free Cash Flow: Guidance range is $850 million to $1 billion .
      3. Enterprise Revenue Growth: Expected to grow 6.4% to 7.5% compared to 2023 .
      4. Diagnostics Revenue Growth: Expected to be up 6.9% to 7.9% compared to 2023 .
      5. Biopharma Revenue Growth: Expected to grow 3.7% to 5% compared to 2023 .
      6. Enterprise Margins: Expected to be flat versus the prior year .
      7. Diagnostics Margins: Expected to be down .
      8. Capital Expenditures: Expected to be approximately 3.5% of revenue for the full year .
      9. Adjusted Tax Rate: Expected to be approximately 23% for the full year .
      10. Invitae Revenue Contribution: Expected to add approximately $120 million in revenue for the remainder of the year .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Enterprise Revenue Growth: Expected to grow 4.8% to 6.4% compared to 2023 .
      2. Diagnostics Revenue Growth: Expected to be up 4.8% to 6% compared to 2023 .
      3. Biopharma Revenue Growth: Expected to grow 3.7% to 5.7% compared to 2023 .
      4. Adjusted EPS: Guidance range is $14.45 to $15.35 .
      5. Free Cash Flow: Guidance range is $1 billion to $1.15 billion .
      6. Adjusted Tax Rate: Expected to be approximately 23% for the full year .
      7. Capital Expenditures: Expected to be approximately 3.5% of revenue for the full year .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. Enterprise Revenue Growth: Expected to grow 4.7% to 6.5% compared to 2023 .
      2. Diagnostics Revenue Growth: Expected to be up 3.2% to 4.8% compared to 2023 .
      3. Biopharma Revenue Growth: Expected to grow 5.5% to 7.5% compared to 2023 .
      4. Adjusted EPS: Guidance range is $14.30 to $15.40 .
      5. Free Cash Flow: Expected to be between $1 billion to $1.15 billion .
      6. Margins: Expected to improve in both Diagnostics and Biopharma segments .
      7. Adjusted Tax Rate: Expected to be approximately 23% for 2024 .
      8. Capital Expenditures: Expected to be approximately 3.5% of revenue in 2024 .
      9. Impact of Weather: Expected to impact earnings by $0.10 to $0.15 in the first quarter .

    Latest news

    Recent developments and announcements about LH.

    Corporate Leadership

      CFO Change

      ·
      Nov 19, 2024, 12:00 AM

      Labcorp's CFO, Glenn Eisenberg, has announced his plans to retire. Julia Wang will take over as the new CFO starting December 2, 2024. Eisenberg will remain with the company as a Special Advisor to the CEO until April 2025 to ensure a smooth transition .

      Leadership Change

      ·
      Nov 19, 2024, 12:00 AM

      Glenn Eisenberg is leaving his role as Chief Financial Officer (CFO) at Labcorp. He is retiring and will step down on December 2, 2024. He will remain as a Special Advisor to the CEO until April 2025 to ensure a smooth transition and assist with strategic initiatives .

      Julia Wang will step up as the new CFO starting December 2, 2024. She brings extensive experience from her previous roles at BeiGene, Alexion Pharmaceuticals, Quest Diagnostics, Johnson & Johnson, and PepsiCo .

      Board Change

      ·
      Nov 19, 2024, 12:00 AM

      Julia Wang has been appointed as the new Chief Financial Officer of Labcorp, effective December 2, 2024. She will replace Glenn Eisenberg, who will retire on April 30, 2025 .

    Financial Actions

      New Share Buyback Program

      ·
      Sep 23, 2024, 12:00 AM

      Laboratory Corporation of America Holdings has announced a new buyback program involving the issuance of $2,000,000,000 in debt securities. This includes $650,000,000 of 4.350% Senior Notes due 2030, $500,000,000 of 4.550% Senior Notes due 2032, and $850,000,000 of 4.800% Senior Notes due 2034. The interest on these notes is payable semi-annually on April 1 and October 1, starting from April 1, 2025. The company has the option to redeem these notes before their respective Par Call Dates at a price equal to the greater of 100% of the principal amount or a make-whole premium, plus accrued interest .