NEW YORK – Laboratory Corporation of America today said that its second quarter revenues were down 4 percent year over year but beat the consensus Wall Street estimate.
For the three months ended June 30, the Burlington, North Carolina-based firm reported $2.77 billion in revenues, down from $2.88 billion in Q2 2019, but above analysts' average estimate of $2.5 billion.
Acquisitions added nearly 2 percent to growth while foreign currency translation decreased revenues by .1 percent and disposition of a business decreased revenues by .3 percent. Organic revenues were down 5.4 percent. The Protecting Access to Medicare Act, which reduced reimbursements for many routine tests, had a negative impact of .5 percent, the firm said.
LabCorp Diagnostics' revenues declined around 4 percent to $1.69 billion from $1.76 billion a year ago. Acquisitions added around 1 percent to revenues, while currency translation contributed a decline of .1 percent. Organic revenues shrank about 5 percent. PAMA had a negative effect of nearly 1 percent.
The Covance Drug Development business saw revenues fall 3 percent to $1.09 billion from $1.13 billion in Q2 2019.
During a conference call following release of the results, Adam Schechter, LabCorp's chairman and CEO, said the company had seen steady recovery in its base business during the quarter for both testing and drug development as people began returning to their doctors for routine visits and clinical trial activity resumed.
He noted that in June test volumes were up year over year, with SARS-CoV-2 testing more than making up for the decline in LabCorp's base testing business. CFO Glenn Eisenberg said that during June organic volume per day was up roughly 6 percent year over year with a 17 percent decline in base testing volumes offset by SARS-CoV-2 testing.
Eisenberg said LabCorp spent $20 million in expanding SARS-CoV-2 testing capacity during the quarter, and Schechter noted that the company planned to continue to ramp up molecular SARS-CoV-2 testing as quickly as possible in anticipation of increasing demand in the fall.
"I believe that we have to continue to build capacity," he said. "We don't know for certain what the fall will bring, but as schools open up, as businesses open up, and as the fall flu season comes to fruition, I think we're going to continue to need more testing, and I do believe PCR testing will remain the gold standard for telling if somebody currently has the disease."
He said LabCorp would "continue to build our capacity irrespective of cost, and that has been our philosophy from the beginning. Buy as many machines as you can, get as much testing equipment as you can."
Eisenberg said the company would continue to suspend its share buyback program but added that it expected "to do tuck-in acquisitions across both businesses that meet our heightened threshold of strategic fit and financial returns." LabCorp said it made two such deals in July, acquiring clinical trial firm GlobalCare and a lab firm it did not name.
Net earnings attributable to the company for Q2 were $231.6 million, or $2.37 per share, compared to $190.4 million, or $1.93 per share, a year ago. Adjusted EPS of $2.57 beat the consensus Wall Street estimate of $.99.
LabCorp's SG&A expenses fell 5 percent year-over-year to $396.3 million from $415.3 million.
The firm ended the quarter with $557.0 million in cash and cash equivalents.
Due to the uncertainty caused by the ongoing SARS-CoV-2 pandemic, the company did not provide full-year 2020 guidance, but Eisenberg said LabCorp does expect to see increased revenue, earnings, and cash flow compared to full-year 2019.
In Tuesday morning trading on the New York Stock Exchange, LabCorp shares were down 1 percent to $199.33.