NEW YORK (360Dx) – Laboratory Corporation of America today reported its 2017 fourth quarter revenues grew 13 percent year over year, as the firm beat the consensus Wall Street estimates on the top and bottom lines.
For the three months ended Dec. 31, 2017, LabCorp reeled in $2.70 billion, up from $2.39 billion in the year-ago period, and above analysts' average estimate of $2.69 billion. The company said that acquisitions drove up revenues 10 percent year over year.
In 2017, LabCorp acquired contract research organization Chiltern for $1.2 billion, as well as Pathology Associates Medical Laboratories, and the assets of Mount Sinai Health System Clinical Outreach Laboratories.
Its Q4 revenues grew almost 3 percent year over year on an organic basis, the firm said, while foreign currency translation added about 60 basis points.
LabCorp Diagnostics recorded $1.82 billion in revenues, up 9 percent year over year from $1.67 billion, and Covance Drug Development revenues increased 24 percent to $886.1 million from $715.6 million.
The company said that its SG&A costs rose 21 percent year over year to $492.4 million from $406.5 million, while amortization of intangibles and other assets were up 29 percent to $62.9 million from $48.8 million. Restructuring and other special charges declined 36 percent to $6.3 million from $9.8 million.
LabCorp's profit for Q4 2017 grew to $706.8 million, or $6.81 per share, from $184.4 million, or $1.75 per share, in Q4 2016. The firm recorded a net benefit of $519.0 million, or $5.00 per share, in the recently completed quarter due to the implementation of the new tax legislation in the US, which resulted in a favorable revaluation of deferred taxes, offset, in part, by the deemed repatriation tax. The company said that the estimated financial impact in Q4 2017 is provisional and is subject to further clarification, which could result in changes to its Q4 2017 estimates during 2018.
Adjusted EPS for Q4 2017 was $2.45 and beat the consensus Wall Street estimate of $2.38.
"Our performance in the quarter demonstrated our multifaceted growth platform, as our Diagnostics and Drug Development businesses each delivered excellent performance through a combination of strategic acquisitions, organic initiatives, and margin improvement," LabCorp Chairman and CEO David King said in a statement. "We are well positioned for another year of strong performance in 2018 driven by momentum in our businesses, expansion of our capabilities, and talent base, broadened geographic presence, and delivery of innovative solutions that only LabCorp can offer."
The company's strategy to expand its role in healthcare will focus on supporting the transition to value-based care, streamlining the drug development process, and creating a broad consumer engagement platform that integrates diagnostics with therapeutics, King said during the earnings conference call.
"In value-based care, our combination of world-class diagnostic and drug development capabilities is critical in accelerating progress toward more precise and personalized healthcare, from helping choose the right test for the right patient at the right time, to offering innovative molecular and genetics tests and delivering the next generation of life saving drugs," King said during the call.
The company is also investing in technology for consumers, such as LabCorp Express, LabCorp PreCheck and the LabCorp Patient portal. Patients can now access their test results through a mobile app version of the LabCorp Patient portal.
King also noted that the company is working to expand new channels for reaching customers. In Denver, 28 percent of the customers who use LabCorp's new Walgreens locations are new customers, King noted. He also suggested that the company was planning to introduce new home testing products.
"New channels of delivery, such as LabCorp at Walgreens and the launch of our new self-collection offering for home use later this year significantly expand our reach and engagement with consumers," King said.
For full-year 2017, total revenues of $10.21 billion were up 8 percent from $9.44 billion in 2016. On average, analysts had estimated $10.19 billion in revenues. Acquisitions contributed almost 6 percentage points to the growth, while organic growth added more than 2 percentage points, LabCorp said.
LabCorp Diagnostics revenues rose 9 percent year over year in 2017 to $7.17 billion from $6.59 billion. Covance Drug Development revenues increased 7 percent to $3.04 billion from $2.84 billion.
LabCorp recorded $1.81 billion in SG&A expenses, up 11 percent from $1.63 billion in 2016. Amortization of intangibles and other assets rose 21 percent to $216.5 million from $179.5 million, and restructuring and other special charges were up 21 percent to $70.9 million from $58.4 million.
Net earnings for the year were $1.27 billion, or $12.21 per share, up from $732.1 million, or $7.02 per share, a year ago. Adjusted EPS was $9.60 and beat the consensus Wall Street estimate of $9.53.
The company said that it invested approximately $1.9 billion in acquisitions in 2017 and repurchased $338.1 million in stock, representing 2.4 million shares.
LabCorp finished 2017 with $316.7 million in cash and cash equivalents.
For 2018, LabCorp said that revenues are estimated to grow between 9.5 percent and 11.5 percent over 2017 restated revenues of $10.42 billion, which assumes the impact of new revenue recognition accounting standards. The restated figures will be finalized upon adoption in Q1 2018 and the amounts are subject to change, the company said.
LabCorp Diagnostics revenues for 2018 are anticipated to grow 3 percent to 5 percent over 2017 restated revenues of $6.86 billion, which includes the anticipated negative impact of the Protecting Access to Medicare Act and the benefit of about 20 basis points from foreign currency translation.
Covance Drug Development is expected to grow between 20 percent and 24 percent over 2017 restated revenue of $3.56 billion.
LabCorp guided to adjusted EPS of $11.30 to $11.70 for 2018.
In early morning trading, LabCorp's shares were up about 4 percent on the New York Stock Exchange to $167.06.