NEW YORK – Laboratory Corporation of America reported on Thursday that its second quarter revenues grew 4 percent year over year, including a 13 percent gain in its base business, which excludes COVID-19 testing revenues.
The company also said that it completed its previously announced spinoff of Fortrea, its clinical development business, on June 30. As part of that transaction, Fortrea paid Labcorp approximately $1.6 billion for certain assets, which Labcorp will use to initiate an accelerated $1 billion share repurchase program and to pay down $300 million in debt.
For the three months ended June 30, Burlington, North Carolina-based Labcorp reported $3.03 billion in revenues, compared to $2.92 billion in the year-ago period and below analysts' average expectation of $3.15 billion. Organic revenue made up 2 percent of that growth, while acquisitions (net of divestitures) contributed almost 2 percent and foreign currency effects contributed a fraction of a percent.
Labcorp said that organic revenue growth was driven by a nearly 10 percent increase in the company's base business, partially offset by an 8 percent decrease in COVID-19 PCR and antibody testing.
By business segment, Labcorp's Diagnostics Laboratories Q2 revenue grew 4 percent to $2.34 billion from $2.26 billion a year ago, driven by 2 percent organic growth and 2 percent acquisitions-related growth, partially offset by foreign currency effects, which drove revenues down a fraction of a percent. The 2 percent organic revenue spike was due to a 12 percent increase in the base business partially offset by a 10 percent decrease in COVID-19 testing, the company said.
Total year-over-year base business growth for the segment was 16 percent, primarily due to 7 percent growth from the company's Ascension lab management agreement announced last October, as well as continued volume recovery compared to last year.
Within the Diagnostics Laboratories segment, total volume as measured by test requisitions increased more than 1 percent as acquisition volume contributed nearly 3 percent while organic volume decreased by 1 percent. Organic volume was impacted by a 6 percent decrease in COVID-19 testing, partially offset by a 5 percent increase in the base business.
Labcorp also broke out revenues for a new business segment called Biopharma Laboratory Services, which comprises its central laboratories and early development research laboratories. In Q2, revenues for this business totaled $699.0 million, up 3 percent from $677.9 million a year ago. The increase was primarily due to organic growth of 2 percent and foreign currency translation of nearly 2 percent, partially offset by divestitures, which negatively impacted growth by a fraction of a percent.
"We delivered strong results in the quarter, and I'm optimistic about our opportunities for continued growth as Labcorp enters the second half of the year with significant momentum," Adam Schechter, chairman and CEO of Labcorp, said in a statement. "Looking forward, we are focused on advancing our strategy as a global laboratory services leader."
Net earnings attributable to Labcorp for the quarter were $188.9 million, or $2.12 per share, compared to $358.6 million, or $3.87 per share, a year ago. Adjusted EPS was $3.42, coming in below analysts' average expectation of $3.53.
The company's Q2 SG&A expenses were $505.8 million, up 17 percent from $432.4 million in the same quarter last year, driven by expenses related to acquisitions and the Fortrea spinoff.
Labcorp revised its full-year 2023 guidance, projecting revenue growth of between 1.5 percent and 3 percent compared to a previous range of 1.5 percent to 4 percent. Full-year base business revenue growth is expected to be between 11.3 percent and 12.6 percent. Labcorp also said it now expects full-year adjusted EPS of $13.00 to $14.00 compared to prior guidance of $16.25 to $17.75.
In Thursday midmorning trading on the New York Stock Exchange, shares of Labcorp were down a percent at $216.15.