Laboratory Corporation of America Holdings LH, also known as LabCorp, is slated to report first-quarter 2023 results on Apr 25, before market open.
In the last reported quarter, the company’s adjusted earnings of $4.14 topped the Zacks Consensus Estimate by 1.9%. The company beat estimates in three of the trailing four quarters and missed in one, the average surprise being 2.86%.
Factors at Play
Similar to the past few quarters, LabCorp is expected to have benefitted from an ongoing sales rebound in the base business for both Diagnostics and Drug Development segments. The company’s Covance Drug Development business is likely to have benefited in Q1 from continued growth momentum in drug development orders.
Recently, LabCorp completed the integration of certain Ascension assets and operations and now provides laboratory management services for nearly 100 hospitals across the Ascension hospital system. It also entered into a strategic relationship with RWJBarnabas Health, AtlantiCare, Prisma Health and St. Dominic.
During the fourth quarter, the company noted that it has made progress in using digital technology and data to deliver better outcomes for patients. We believe these developments to have contributed to LabCorp’s Q1 revenues significantly.
Turning to oncology, the company continues to deepen its leadership position by expanding its cancer-related diagnostic screening and testing portfolio and by partnering with its pharmaceutical clients. During the fourth quarter, it launched a liquid biopsy test called Labcorp Plasma Focus. The test is used to match cancer patients with FDA- approved therapies using the patient's circulating tumor DNA taken from a blood draw. This development is likely to have made contributions to the company’s first-quarter performance.
However, similar to the last reported quarter, growth in early development and clinical development is expected to have been offset by central labs on account of a significant slowdown in COVID-related work and the Russia-Ukraine crisis.
Laboratory Corporation of America Holdings Price and EPS Surprise
Laboratory Corporation of America Holdings price-eps-surprise | Laboratory Corporation of America Holdings Quote
Within LabCorp Diagnostics, base business organic volume is anticipated to have continued its rally, led by consistent growth in esoteric and routine procedures. However, a slowdown in COVID-19 testing is likely to have hampered sales performance within the segment. This is expected to get reflected in its Q1 earnings release.
Moreover, the company’s first-quarter performance is expected to have benefitted from increased customer adoption of LabCorp's Diagnostic assistant -- a tool that eclipses positions with the information they need to improve tariffs. Its investment in call center automation is improving the customer experience by enabling patients and providers to get answers faster through the self-service feature. We believe this to have benefitted the company in the to-be-reported quarter, backed by strong market adoption.
Key Q1 Estimates
The Zacks Consensus Estimate for first-quarter earnings of $3.99 per share implies a 34.7% plunge from the year-ago reported figure. The consensus estimate for revenues is pegged at $3.75 billion, suggesting a 3.9% fall from the prior-year reported number.
What Our Model Suggests
Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a higher chance of beating estimates. However, that is not the case here as you can see:
Earnings ESP: The company has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.
Bio-Rad Laboratories BIO has an Earnings ESP of +0.16% and a Zacks Rank of #1. The company is slated to release first-quarter 2023 results on May 4. You can see the complete list of today’s Zacks #1 Rank stocks here.
Bio-Rad has a 2023 expected earnings growth rate of 10.3%. BIO’s earnings yield of 3.38% compares favorably with the industry’s (2.78%).
Henry Schein, Inc. HSIC has an Earnings ESP of +0.99% and a Zacks Rank of #1. Henry Schein is expected to release first-quarter fiscal 2023 results on May 2.
HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%. HSIC’s 2024 growth rate is estimated at 7.7%.
Teva Pharmaceutical Industries Limited TEVA currently has an Earnings ESP of +14.97% and a Zacks Rank of #2. TEVA is expected to release first-quarter 2023 results on May 2.
TEVA’s 2024 growth rate is estimated at 4.4%. TEVA’s earnings yield of 25.50% compares favorably with the industry’s (34.35%).
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