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LABCORP HOLDINGS INC. (LH)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered double‑digit topline growth and margin expansion: revenue $3.53B (+9.5% YoY), adjusted EPS $4.35 (+10.4% YoY), adjusted operating margin 15.1% (+20 bps) . Management raised full‑year enterprise revenue, adjusted EPS, and free cash flow guidance on strength and FX tailwinds .
  • Diagnostics revenue rose 8.9% to $2.75B with 4.9% volume growth and +4.0% price/mix; Biopharma Laboratory Services (BLS) revenue rose 11.0% to $784.8M with backlog up 10% YoY to $8.71B and TTM book‑to‑bill of 1.11 .
  • Consensus comparisons: revenue and EPS both beat S&P Global consensus in Q2 2025; Q1 2025 saw an EPS beat but a slight revenue miss. Estimates are poised to drift higher given raised guidance and stronger bookings trajectory in BLS [GetEstimates]*.
  • Catalysts: guidance raise, accelerating specialty test launches (oncology, neurology, Alzheimer’s), hospital/outreach acquisitions (Incyte, CHS outreach), and improving BLS bookings underpin the narrative; regulatory overhang (PAMA) remains, with ~$100M potential 2026 impact to be mitigated via LaunchPad and operational actions .

What Went Well and What Went Wrong

What Went Well

  • Raised FY25 guidance: enterprise revenue to 7.5–8.6%, adjusted EPS to $16.05–$16.50, and free cash flow to $1.13–$1.28B; CFO cited FX tailwinds and underlying business strength .
  • Segment momentum and margin gains: Diagnostics AOI margin up 10 bps to 17.6%; BLS AOI margin up 50 bps to 15.7% on organic demand and efficiencies .
  • Strategic execution: “delivering double‑digit topline growth, while expanding margins across both segments … we’re raising our guidance” — Adam Schechter (CEO) . Specialty launches (Plasma Detect MRD; PGDx elio plasma focus Dx) expand oncology offerings .

What Went Wrong

  • Invitae headwind constrained adjusted operating margin by ~30 bps; absent this, margins would have been ~50 bps higher in Diagnostics .
  • Venture fund losses weighed on adjusted reconciliations ($32.7M loss in Q2) .
  • Regulatory uncertainty persists: PAMA could impact 2026 by ~$100M top and bottom line; management plans mitigation via LaunchPad and other efficiencies, but full offset is unlikely .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Billions)$3.221 $3.345 $3.527
Diluted EPS (GAAP, $)$2.43 $2.52 $2.84
Adjusted EPS (Non‑GAAP, $)$3.94 $3.84 $4.35
Operating Margin (%)9.2% 9.7% 11.2%
Adjusted Operating Margin (%)14.9% 14.0% 15.1%

Segment breakdown (Q2 2025 vs Q2 2024):

SegmentQ2 2024 Revenue ($USD Billions)Q2 2025 Revenue ($USD Billions)YoY GrowthQ2 2024 AOI ($USD Millions)Q2 2025 AOI ($USD Millions)AOI Margin Q2 2024AOI Margin Q2 2025
Diagnostics Laboratories$2.525 $2.749 8.9% $441.5 $482.8 17.5% 17.6%
Biopharma Laboratory Services$0.707 $0.785 11.0% $107.4 $123.3 15.2% 15.7%
Consolidated$3.221 $3.527 9.5% $479.9 $531.6 14.9% 15.1%

KPIs:

KPIQ2 2024Q1 2025Q2 2025
Diagnostics Volume Δ YoY—Total: +3.0%; Organic: +0.9% Total: +4.9%; Organic: +3.4%
Diagnostics Price/Mix Δ YoY—Total: +3.0%; Organic: +0.7% Total: +4.0%; Organic: +1.1%
BLS Backlog ($USD Billions)$7.99 (as of 12/31/24) $8.18 (as of 3/31/25) $8.71 (as of 6/30/25)
BLS TTM Book‑to‑Bill1.00 1.07 1.11
Free Cash Flow ($USD Millions)$432.9 ($107.5) $542.7
Operating Cash Flow ($USD Millions)$561.1 $18.5 $620.6
Capex ($USD Millions)$128.2 $126.0 $77.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Enterprise Revenue Growth (%)FY 20256.7%–8.0% 7.5%–8.6% Raised/narrowed
Diagnostics Revenue Growth (%)FY 20256.5%–7.7% 7.0%–8.0% Raised/narrowed
BLS Revenue Growth (%)FY 20253.0%–5.0% 6.1%–7.5% Raised/narrowed (FX tailwind)
Adjusted EPS ($)FY 2025$15.70–$16.40 $16.05–$16.50 Raised midpoint by $0.23
Free Cash Flow ($USD Billions)FY 2025$1.10–$1.25 $1.13–$1.28 Raised midpoint by $0.025B
Adjusted Tax Rate (%)FY 2025~23% (management) ~23% Maintained
Capex (% of revenue)FY 2025—~3.8% Established
Dividend per Share ($)Q3 payment—$0.72 declared, payable Sep 11, 2025 Ongoing capital return

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
AI/technology initiativesEnhanced Global Trial Connect; launched H5 bird flu test; MS monitoring Added digital pathology (AI‑powered analysis) in Central Labs; continued LaunchPad efficiencies; using digital to improve NPS and margins Increasing deployment and impact
Specialty test portfolio (oncology, neurology, Alzheimer’s)Launched Plasma Complete; pTau‑217/BA42 Alzheimer’s test; expanded OnDemand Plasma Detect MRD and PGDx elio plasma focus Dx launched; plan to offer Fujirebio Alzheimer’s biomarker Broadening rapidly; oncology focus intensifies
Hospital/health system partnerships & outreach dealsInspira, NMHS acquisitions/agreements Incyte assets; progressed BioReference assets; CHS outreach assets across 13 states (paid $195M); pipeline remains strong Accelerating scale and access
BLS bookings/backlogTTM book‑to‑bill 1.00; backlog $7.99B TTM book‑to‑bill 1.11; backlog $8.71B; strong central labs awards Improving bookings and visibility
Regulatory/legal (PAMA)Not highlighted in PRBase case includes ~$100M impact if implemented; pursuing legislation/delay/data improvements; launch efficiency offsets Heightened focus; mitigation plan articulated
Pricing/mix and utilizationOrganic pricing/mix +0.7% and test per accession growth (Q1) Pricing/mix +4.0% (organic +1.1%); test per accession growth and specialty mix driving price/mix; unit price relatively flat Sustained volume+mix tailwinds

Management Commentary

  • “Labcorp had a very strong second quarter, delivering double‑digit topline growth, while expanding margins across both segments … we’re raising our guidance.” — Adam Schechter, CEO .
  • “Operating income … 11.2% of revenue, 15.1% on an adjusted basis … adjusted EPS was $4.35 … Free cash flow was $543M … majority of FCF in second half … leverage ~2.5x, low end of target.” — Julia Wang, CFO .
  • “Diagnostics revenue grew 9% … volume up ~5%; price/mix up 4% … specialty areas growing 3–4x faster than diagnostic market, driving routine spillover.” — Adam Schechter .
  • “BLS adjusted operating income and margin increased, primarily driven by organic demand and operating efficiencies … quarterly book‑to‑bill 1.18; TTM 1.11.” — Julia Wang .

Q&A Highlights

  • PAMA risk and mitigation: Base case assumes PAMA in 2026 with ~$100M impact; company working on legislative solutions, potential delay, and broader data to improve calculation; offsets via LaunchPad and AI/process initiatives, though full offset unlikely .
  • CHS outreach acquisition: $195M cash; expected first‑year accretion and strong margin profile; hospital outreach typically higher margin than in‑hospital lab ops; inorganic growth range raised reflecting hospital deals .
  • BLS momentum: Early Development growth aided by easy comps and study start timing; expect mid‑single‑digit full‑year growth with tougher Q4 comps; central labs strength driven by large awards, improving visibility .
  • Managed care contracting: renewals on reasonable terms, unit price flat; hospital deals help lower payer rates and support negotiations .
  • Utilization durability: Strong volumes embedded in guidance; diagnostics midpoint 7.5% growth with ~3:1 volume:mix split; aging population and specialty advances support sustainability .

Estimates Context

MetricQ2 2024 ConsensusQ2 2024 ActualQ1 2025 ConsensusQ1 2025 ActualQ2 2025 ConsensusQ2 2025 Actual
Revenue ($USD Billions)$3.184*$3.221 $3.399*$3.345 $3.489*$3.528
Primary EPS ($)$3.771*$3.94 $3.735*$3.84 $4.179*$4.35
  • Q2 2025: Revenue and EPS both beat consensus; revenue +$0.039B (+1.1%), EPS +$0.17 (+4.1%) [GetEstimates]* .
  • Q1 2025: EPS beat; revenue slight miss vs consensus [GetEstimates]* .
  • Q2 2024: Revenue and EPS beat [GetEstimates]* .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Guidance trajectory is positive with raised ranges across enterprise revenue, adjusted EPS, and free cash flow; FX adds a modest tailwind in BLS, and margins expected to expand in both segments through 2H25 .
  • Diagnostics growth quality is improving: volume +4.9% and price/mix +4.0% with flat unit price; specialty content (oncology, neurology, autoimmunity) drives spillover into routine testing and raises tests per accession .
  • BLS visibility strengthening: backlog $8.71B (+10% YoY), TTM book‑to‑bill 1.11, large central lab awards provide multi‑quarter fuel; expect mid‑single‑digit constant currency growth for both ED and CLS in FY25 .
  • M&A/hospital outreach deals are accretive and strategically additive; CHS outreach ($195M) expected accretive in year one; pipeline remains robust, supporting inorganic growth within raised range .
  • Capital allocation remains balanced: $200M buybacks, $59.9M dividends in Q2, cash $647M, total debt $5.58B; leverage ~2.5x at low end of target, enabling continued buybacks, dividends, and bolt‑ons .
  • Watch PAMA: Base case includes ~$100M 2026 headwind; multiple mitigation avenues in flight; any legislative delay/change would be a positive surprise. LaunchPad/AI initiatives are positioned to partially offset .
  • Near‑term trading: beats plus guidance raise are supportive; upside linkage to sustained utilization strength and BLS bookings; monitor FX, Invitae margin drag normalization (annualizes in Q3) and Q4 ED comp headwind cadence .

Other Relevant Q2 2025 Press Releases

  • Dividend declared: $0.72 per share, payable Sep 11, 2025; record date Aug 28, 2025 .
  • Oncology launches: Plasma Detect MRD and PGDx elio plasma focus Dx broaden precision oncology offerings and complement tissue workflows .

Cross‑References and Adjustments

  • Non‑GAAP adjustments: Adjusted operating income adds back amortization, restructuring/special items, acquisition/disposition costs, LaunchPad costs, TSA reimbursement, and venture fund losses; adjusted EPS of $4.35 reflects these reconciliations .
  • Invitae impact: adjusted operating margin constrained by Invitae (~30 bps headwind); Diagnostics margins otherwise higher .