NEW YORK (GenomeWeb) – Laboratory Corporation of America today reported that its third quarter revenues rose 4 percent over Q3 2015, with organic revenue growth and acquisitions offsetting the negative impact of currency translation.
For the quarter ended Sept. 30, the firm reported total revenues of $2.41 billion, up from $2.32 billion year over year and beating the average Wall Street analysts' estimate of $2.38 billion.
Its stock sank in Wednesday morning trade, though, as the firm fell short of the consensus estimate on the bottom line.
During the quarter, LabCorp completed the $371 million acquisition of Sequenom. On a conference call with analysts following the release of the results, LabCorp Chairman and CEO David King said that he expected the acquisition would be accretive to earnings within the first year of ownership, noting that the firm's "integration plans are on track."
He added that the "addition of Sequenom positions us as the market leader in NIPT, women's health, and reproductive genetics."
King said that the acquisition enables LabCorp to "offer patients and physicians one source for the most complete range of women's health diagnostics, simplifying customer experience. Non-invasive pre-natal testing is an exciting long-term growth opportunity that continues to gain traction with payors, as evidenced by increasing coverage for average-risk pregnancies," he said. "We also see increasing interest from providers, as evidenced by the American College of Medical Genetics and Genomics updated physician's statement, which recommends that providers inform all pregnant women that non-invasive prenatal screening is the most sensitive screening option."
Revenue and margin gains in the quarter were also driven by LaunchPad, the firm's business process improvement initiative, and by cost synergies related to the acquisition of Covance in 2014, it said. LaunchPad will deliver net savings of $150 million through the three-year period ending in 2017, the firm added.
Third quarter revenues from LabCorp's diagnostics business were $1.76 billion, a 4 percent increase from $1.60 billion in Q3 2015, while the Covance drug development segment brought in $701.1 million in revenues, a 5 percent increase from $669.0 million in the year-ago period.
LabCorp reported Q3 net income of $179.5 million, or $1.71 per share, compared to $154.7 million, or $1.50 per share, in Q3 2015. Its adjusted EPS was $2.25, missing analysts' consensus estimate of $2.29. The firm incurred a loss of $0.01 per share in the quarter from the acquisition of Sequenom, which closed in September.
The firm's SG&A costs rose 9 percent to $400.5 million from $385.6 million a year ago.
LabCorp finished the quarter with $567.6 million in cash and cash equivalents.
The company also updated its 2016 guidance and is now projecting net revenue growth in the range of 10 to 11 percent over net revenues of $8.51 billion in 2015. Previously, the firm had said it was expecting revenue growth between 9.5 percent and 10.5 percent.
The firm also said it expects FY2016 adjusted EPS of $8.70 to $8.90, versus prior guidance of $8.60 to $8.95, and compared to $7.91 in 2015. Analysts, on average, have estimated 2016 EPS of $8.81.
The firm is also investing in technology that increases "patient and consumer engagement and creates a better experience at LabCorp," King said. "Our most recent initiative includes our real-time insurance eligibility capability, which was implemented nationally earlier this year and allows our personnel to determine whether a patient is insured at the time of service. This tool benefits our patients by helping them avoid unexpected coverage denials."
In Wednesday morning trade on the New York Stock Exchange, shares of LabCorp were down 7 percent at $128.56.