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    LABCORP HOLDINGS (LH)

    Q4 2024 Earnings Summary

    Reported on Feb 25, 2025 (Before Market Open)
    Pre-Earnings Price$249.99Last close (Feb 5, 2025)
    Post-Earnings Price$252.98Open (Feb 6, 2025)
    Price Change
    $2.99(+1.20%)
    • Margin expansion expected in both Diagnostics and Biopharma segments, driven by strong organic demand, successful integration of acquisitions like Invitae, and effective cost management initiatives such as LaunchPad delivering $100–$125 million in annual savings.
    • Strong growth in high-margin esoteric testing areas such as oncology, women's health, neurology, and autoimmune diseases, growing at 3× the historical rate, with the company gaining market share and expecting to outpace market growth of 1%–2%.
    • Robust M&A pipeline with increased expected revenue contribution from deals, rising from 1%–2% to 1.5%–2.5%, along with a solid capital allocation strategy balancing acquisitions, share repurchases, and dividends, supported by financial flexibility due to low leverage and strong cash flow.
    • The company may be underestimating inflationary pressures, particularly labor costs, by assuming only a 3% to 3.5% increase, which could negatively impact margins if actual inflation exceeds these assumptions.
    • Regulatory uncertainties surrounding PAMA reimbursement cuts scheduled for 2026 could pressure revenues and margins if the company is unable to secure favorable legislative changes. ,
    • The Invitae acquisition is expected to be dilutive to margins in the first half of 2025, with potential integration risks that may impact financial performance. ,
    MetricYoY ChangeReason

    Total Revenue

    +9.8% (from $3,033.3M in Q4 2023 to $3,329.4M in Q4 2024)

    Total Revenue increased by 9.8% YoY, reflecting robust growth compared to the previous period. This rise appears to be driven by strong organic performance and potential acquisition contributions, underscored by North America's significant revenue of $3,223.9M which reinforces regional strength.

    Dx Segment Revenue

    +10.2% (from $2,346.8M in Q4 2023 to $2,586.2M in Q4 2024)

    Dx Segment Revenue climbed by 10.2% YoY, indicating an improvement over the previous period. Enhanced organic volume, improved product mix and potential acquisitions are likely contributors, building on prior gains observed in similar growth drivers.

    Intercompany Eliminations

    Increase in magnitude (183% from -$8.4M in Q4 2023 to -$23.8M in Q4 2024)

    Intercompany Eliminations worsened significantly, moving from -$8.4M to -$23.8M, a dramatic increase in magnitude. This suggests that changes in inter-segment or intra-company transactions, possibly due to integration or reorganization efforts, led to a more pronounced elimination effect.

    Operating Income

    Turnaround from a loss of -$122.8M in Q4 2023 to a gain of $216.5M in Q4 2024

    Operating Income recovered sharply, reversing a loss (-$122.8M) to a positive $216.5M. This turnaround is attributed to cost efficiency initiatives, improved margin management and stronger operational performance relative to the previous period.

    Net Income & EPS

    Flip from a loss of -$167.1M (EPS -$1.86) in Q4 2023 to a gain of $143.6M (EPS Basic: $1.72, Diluted: $1.70) in Q4 2024

    Net Income and EPS reversed from losses to profitability, with net income improving by over $310M and EPS turning positive. This dramatic shift reflects better operating performance, effective cost control, and a healthier revenue mix compared to the prior period.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Enterprise Revenue Growth

    FY 2025

    no prior guidance

    6.7% to 8%

    no prior guidance

    Diagnostics Revenue Growth

    FY 2025

    no prior guidance

    6.5% to 7.7%

    no prior guidance

    Biopharma Revenue Growth

    FY 2025

    no prior guidance

    3% to 5%

    no prior guidance

    Adjusted EPS

    FY 2025

    no prior guidance

    $15.60 to $16.40

    no prior guidance

    Free Cash Flow

    FY 2025

    no prior guidance

    $1.1 billion to $1.25 billion

    no prior guidance

    Enterprise Margins

    FY 2025

    no prior guidance

    Expected to improve

    no prior guidance

    Adjusted Tax Rate

    FY 2025

    no prior guidance

    Approximately 23%

    no prior guidance

    Capital Expenditures

    FY 2025

    no prior guidance

    3.8% of revenue

    no prior guidance

    Foreign Exchange Impact

    FY 2025

    no prior guidance

    Diagnostics: 50 bps headwind; Biopharma: 140 bps headwind

    no prior guidance

    MetricPeriodGuidanceActualPerformance
    Enterprise Revenue Growth
    Q4 2024
    6.6% to 7.3% YoY
    9.7% YoY (from 3,033.3In Q4 2023 to 3,329.4In Q4 2024)
    Beat
    Diagnostics Revenue Growth
    Q4 2024
    7.2% to 7.8% YoY
    10.2% YoY (from 2,346.8In Q4 2023 to 2,586.2In Q4 2024)
    Beat
    Capital Expenditures
    FY 2024
    ~3.5% of revenue
    ~3.77% of FY 2024 revenue (sum of Q1–Q4 2024 CapEx÷ sum of Q1–Q4 revenue)
    Missed
    TopicPrevious MentionsCurrent PeriodTrend

    Invitae acquisition

    Progressing well; 40 bps negative margin impact in 2024, expected slight accretion in 2025

    Integration on track, 10%+ revenue growth; Slightly accretive for full year 2025

    Consistent focus; More positive sentiment

    Margin expansion (Diagnostics & Biopharma)

    Emphasized as steadily improving across 2024; Held back in early 2024 by dilutive factors

    Expected in 2025, driven by operational efficiencies and Invitae turning accretive

    Recurring topic; Continued optimism

    Esoteric testing growth (oncology, women’s health, neurology, autoimmune)

    Faster growth vs. routine, highlighted as strategic focus

    Growing at 3x historical diagnostic rate, gaining market share

    Consistent high-growth driver

    M&A pipeline and inorganic growth

    Increased inorganic guidance from 1%-2% to 1.5%-2.5%; Confidence in strong pipeline

    Robust pipeline; Completed 10 acquisitions in 2024; Key contributor to 2025 revenue

    Ongoing priority; Sustained positive outlook

    Labor costs, turnover, inflation

    Competitive labor market, higher turnover in Diagnostics but improving

    Turnover improving, 3% to 3.5% labor inflation assumption; LaunchPad offsets

    Gradually improving conditions

    Hospital deals & lab management agreements

    Drove volume and share gains, initial margin drag but improve over time

    10 transactions in 2024; Partnerships expanding local market share

    Continued expansion; Key to gaining share

    LabCorp OnDemand consumer business

    Launch of magnesium and micronutrient tests; revenue not material but growing fast

    Additional consumer-initiated tests (e.g., vitamins, homocysteine)

    Added offerings; Positive expansion

    Early development/biotech sector challenges

    Higher-than-normal cancellations, cautious outlook but expecting rebound

    12% YoY revenue growth, RFPs remain strong, cancellations near high end of normal

    Situation improving; Less negative

    PAMA reimbursement regulation

    Delays and uncertainty; modeling eventual impact

    Still pushing legislative fixes, base case 2026 implementation

    Ongoing legislative uncertainty

    Volume & market share gains (Diagnostics)

    Driven by hospital agreements, faster esoteric testing

    6.8% total volume growth, attributed to share gains

    Consistent growth above historical trend

    1. Margin Outlook
      Q: How will margins evolve given Invitae and guidance?
      A: Management expects margin expansion in both Diagnostics and Biopharma businesses in 2025, with Invitae expected to be dilutive to margins in the first half but slightly accretive for the full year, contributing to confidence in margin improvements.

    2. Diagnostics Growth Outlook
      Q: What are your expectations for Diagnostics growth and drivers?
      A: Diagnostics revenue is expected to grow 6.5% to 7.7% in 2025, with a midpoint of 7.1%. Half of the growth (~3.5%) will come from organic growth, and the other half from acquisitions completed in 2024. Volume growth remains higher than historical 1–2% due to market share gains but is expected to normalize over time.

    3. M&A Outlook
      Q: What is the outlook for M&A and capital allocation?
      A: With strong cash flow and leverage at 2.2× net debt to EBITDA, management sees a strong acquisition pipeline and plans to pursue more hospital, local, and regional lab deals that meet financial criteria. Capital allocation priorities include dividends, acquisitions, and potential share buybacks.

    4. Invitae Integration
      Q: How is the Invitae integration progressing?
      A: The Invitae integration is going very well, with expected revenue growth of over 10%. Invitae is anticipated to be slightly accretive for full year 2025, being dilutive in the first half but accretive in the second half.

    5. Biopharma Services Outlook
      Q: What is the outlook for biopharma services and NHP supply in 2025?
      A: Biopharma services are expected to grow 3% to 5% in 2025. Strong backlogs and healthy RFPs support the forecast, with approximately 85% of Central Labs' forecast coming from backlog. Margins are expected to expand, though at a slower pace due to a 140 basis point FX headwind. Management is confident in NHP supply meeting forecasted needs.

    6. Inflation Impact
      Q: How will inflation and tariffs affect margins in 2025?
      A: Management assumes 3% to 3.5% inflation, primarily in labor costs, which have improved due to lower turnover. They plan to offset increased costs through the LaunchPad initiative, targeting $100 million to $125 million in annual savings. Potential tariff impacts are considered manageable.

    7. Free Cash Flow Conversion
      Q: How does 2025 free cash flow growth compare to EPS growth?
      A: Free cash flow guidance for 2025 is $1.1 billion to $1.25 billion, with a midpoint of $1.175 billion, up from $1.1 billion in 2024. Growth is driven by higher cash earnings and some working capital benefits, with cash conversion targeted around mid-70%.

    8. Diagnostics Pricing and Utilization
      Q: What's the outlook for pricing and utilization in Diagnostics?
      A: Diagnostics revenue is expected to grow 7% in 2025, with 3.5% from organic growth and 3.5% from acquisitions. Payer discussions are positive, with appreciation for LabCorp's high-quality, lower-cost services and broad test portfolio. Management feels confident about the pricing environment and utilization trends.

    9. Esoteric Testing Growth
      Q: How does esoteric testing contribute to growth?
      A: Growth in esoteric testing, particularly in oncology, women's health, neurology, and autoimmune diseases, is the historical rate of diagnostics. This subset contributes significantly to organic growth, and the company expects to gain market share even if overall utilization returns to 1–2% historical levels.

    10. PAMA Legislation Impact
      Q: What's the outlook regarding PAMA and its potential impact?
      A: Management assumes PAMA will come into effect in 2026 and has built plans accordingly. They continue to work with trade organizations to seek better legislative options or delays.

    11. Lab Developed Test Regulation
      Q: Will lab developed test regulations have a cost impact?
      A: Additional costs are not significant, as LabCorp was already complying with many requirements due to New York State submissions. Minor system costs are within provided guidance, so no significant financial impact is expected.

    12. Weather and Calendar Impact
      Q: What is the impact of weather and calendar on '25 guidance?
      A: A $0.10 negative impact from weather in January is included in guidance. The 2025 calendar will be slightly unfavorable due to one less revenue day, partially offset by one less payroll day.

    13. Biopharma Lab Services Growth
      Q: What's driving biopharma lab services growth in 2025?
      A: Biopharma lab services are expected to grow 3% to 5%, with early development growing slightly faster than central lab. Pricing is flat, so growth is driven by volume increases.

    14. Diagnostics Margin Expansion
      Q: Will core margins in Diagnostics continue to grow in 2025?
      A: Management expects margin expansion in Diagnostics, with Invitae becoming slightly accretive for full year 2025. Tailwinds from improved labor turnover and cost initiatives are also contributing factors.

    15. Tariff Impact
      Q: How are potential tariffs expected to affect supply costs?
      A: Management considers potential tariff impacts to be manageable and has evaluated various scenarios.

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