NEW YORK – Laboratory Corporation of America on Thursday reported a 10 percent decline in Q4 revenues as a recovery in base testing levels was overset by a drop in COVID-19 testing.
Total revenues for the quarter ended Dec. 31, 2021 were $4.06 billion, down from $4.49 billion in the same quarter last year but beating analysts' average estimate of $3.90 billion.
Diagnostics revenues for the fourth quarter were $2.62 billion, down 17 percent from $3.15 billion in the same quarter last year. The company's Covance drug development business saw revenues rise 4 percent to $1.45 billion in the quarter from $1.40 billion in the fourth quarter of 2020.
Less than 1 percent of LabCorp's diagnostics business growth came from acquisitions with less than 1 percent also coming from favorable currency translation, the Burlington, North Carolina-based firm said. The 10 percent decline in organic revenues was composed of a 15 percent drop in COVID-19 testing, offset by a 5 percent increase in the company's base testing business. Test volumes (measured by requisitions) were down 9 percent during the quarter as acquisition-related volume grew less than 1 percent and base testing volumes were up 8 percent.
Labcorp announced Wednesday that it has entered into an agreement with St. Louis-based health system Ascension to manage the system's hospital-based laboratories in 10 states and to acquire certain parts of Ascension's outreach business. The lab management arrangement will cover Ascension’s hospital laboratories in Alabama, Florida, Kansas, Maryland, Michigan, New York, Oklahoma, Tennessee, Texas, and Wisconsin, Labcorp said. Financial and other terms of the transaction were not disclosed.
On a conference call following release of the Q4 results, LabCorp Chairman and CEO Adam Schecter said that the company expects the first year annualized revenues from the Ascension deal to be between $550 and $600 million.
He added that Labcorp anticipates more M&A activity "in the coming months."
Schecter also highlighted the pending acquisition of Personal Genome Diagnostics, characterizing it as part of the company's larger effort to expand its testing offerings and clinical trial work in oncology.
Additionally, he addressed the results of Labcorp's review of its capital allocation and structure that it launched last year with the goal of improving its stock price. Echoing comments he first made at the 40th Annual JP Morgan Healthcare Conference in January, he said that the company is initiating a quarterly dividend starting in Q2 2022 and authorizing a $2.5 billion share repurchase, with $1 billion of common stock to be repurchased on an accelerated schedule.
Labcorp's net earnings for Q4 were $553.6 million, or $5.75 per share, compared to net earnings of $938.6 million, or $9.54 per share, in the same quarter last year. Adjusted EPS for Q4 2021 was $6.77, beating the consensus Wall Street estimate of $5.79.
The company's SG&A costs were $543.7 million, up 5 percent from $518.0 million in the same quarter last year.
For full-year 2021, revenues were $16.12 billion, up 15 percent from to $13.98 billion in 2020 and beating the analysts' average estimate of $15.99 billion. The diagnostics division posted $10.36 billion in revenues, up 12 percent from $9.25 billion in 2020. Full-year revenues in the Covance business grew 20 percent to $5.85 billion from $4.88 billion.
Acquisitions contributed under 1 percent to full-year 2021 revenues, while foreign currency translation also contributed just under 1 percent and disposition of businesses had a negative impact of less than 1 percent, LabCorp said. The 15 percent increase in organic revenue comprised 14 percent growth in the company's base business offset by a decline of less than 1 percent in COVID-19 testing.
Net earnings for the year was $2.38 billion, or $24.39 per share, compared to $1.56 billion, or $15.88 per share, in 2020. Adjusted EPS for full-year 2021 was $28.52, beating the consensus Wall Street estimate of $27.60.
For 2021, LabCorp spent $1.95 billion on SG&A, up 13 percent from $1.73 billion in 2020.
The company finished 2021 with cash and cash equivalents of $1.47 billion.
For 2022, LabCorp projected year-over-year revenue change ranging from a decline of 7 percent to a decline of 2 percent and adjusted EPS of between $17.25 and $21.25.
The company expects its base testing business will grow between 8 percent and 10 percent in 2022 compared to 2021 while COVID-19 revenue is anticipated to decline 60 percent to 75 percent year-over-year.
Glenn Eisenberg, Labcorp executive vice president and CFO, also provided a longer-term outlook, offering what he said was the company's "current view of the business from 2022 to 2024."
During that period he said the company expects enterprise-based business organic revenue to grow at a compound annual growth rate of 4 percent to 7 percent. Acquisitions are expected to provide additional annual growth or 2 percent to 3 percent. Labcorp expects its diagnostics base business to post an organic CAGR of 2.5 percent to 4 percent a year. Eisenberg noted that this is above the company's historical growth rate, adding that it expected it would be driven by "a continued recovery in our base business relative to 2021, broad-based growth including hospitals and health systems, and the lower incremental impact of [the Protecting Access to Medicare Act] in the outlook period."
In Thursday morning trading on the NYSE, Labcorp shares were up 2 percent to $287.51.