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Labcorp Q1 Revenues Down 3 Percent

NEW YORK – Laboratory Corporation of America on Tuesday reported a 3 percent year-over-year decline in Q1 revenues.

Labcorp's revenues for the quarter ended March 31 were $3.78 billion, down from $3.90 billion in the same quarter last year and above the consensus Wall Street estimate of $3.69 billion.

Organic revenues were down 4 percent while currency translation pushed revenues down by less than 1 percent. Acquisitions contributed revenue growth of slightly more than 1 percent, the Burlington, North Carolina-based firm said.

In the company's diagnostics division, revenue for the quarter was $2.38 billion, down 3 percent from $2.45 billion in the same quarter last year. Organic revenues were down 5 percent, with an 84 percent drop in the company's COVID-19 testing business partially offset by a 17 percent rise in organic base testing revenues. Labcorp's reported base testing revenues were up 20 percent year over year, which included a roughly 7 percent benefit from the Ascension lab management agreement along with a positive impact from weather and extra revenue days of roughly 2 percent.

Total volume, as measured by test requisitions, was down 3 percent, with organic volume down 6 percent, as the company saw a continued drop in COVID-19 testing volumes.

Revenues for the company's Covance unit, which focuses on drug development, were $1.40 billion for the quarter, down 4 percent from $1.46 billion in Q1 2022. Labcorp said the planned spinoff of its Covance business is progressing on schedule and is expected to be completed in the middle of the year. The new company will be called Fortrea.

On a conference call following release of the Q1 results, Labcorp Chairman and CEO Adam Schechter said Labcorp saw solid performance across its diagnostics business.

"Whether you look at esoteric, routine, hospital… we're looking very, very strong in our diagnostic business," he said.

He highlighted the performance of Labcorp's deal with Ascension where the company is now providing lab management services for roughly 100 hospitals across the Ascension system.

Executive Vice President and CFO Glenn Eisenberg said during the call that factors including esoteric testing growth outpacing growth in routine testing as well as an increase in Medicare draw fees had helped the company maintain favorable pricing despite broader downward pressures on lab pricing.

Net earnings attributable to Labcorp for the quarter were $212.9 million, or $2.39 per share, compared to net earnings of $491.6 million, or $5.23 per share, for Q1 last year. The company's adjusted EPS was $3.82, below analysts' average estimate of $3.96.

The company's SG&A expenses were $553.6 million, up 19 percent from $464.1 million in the same quarter last year, with that increase driven by expenses related to acquisitions and the spinoff of Fortrea.

Labcorp reported $393.9 million in cash and cash equivalents as of the end of the quarter.

The company revised its full-year 2023 guidance, projecting revenue growth of between 1.5 percent and 4 percent and adjusted EPS of between $16.25 and $17.75 along with growth in its base business of between 9.5 percent and 11 percent and a decline in its COVID-19 testing business of between 80 percent and 90 percent.

Previously, it projected revenue growth ranging between 1 percent and 4 percent and adjusted EPS of between $16.00 and $18.00 along with growth in its base business of between 8.5 percent and 10.5 percent and a decline in its COVID-19 testing business of between 75 percent and 90 percent.

In Tuesday morning trading on the New York Stock Exchange, Labcorp stock was down 4 percent to $223.76.