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LabCorp Q4 Revenues Rise 52 Percent

NEW YORK – Laboratory Corporation of America on Thursday reported 52 percent year-over-year revenue growth for the fourth quarter, driven by strong demand for COVID-19 testing.

Total revenues for the quarter ended Dec. 31, 2020 were $4.49 billion, up from $2.95 billion in the same quarter last year and beating analysts' average estimate of $3.95 billion.

Diagnostics revenues for the fourth quarter were $3.15 billion, up 79 percent from $1.76 billion in the same quarter last year. The company's Covance drug development business saw revenues rise 17 percent to $1.40 billion in the quarter from $1.20 billion in the fourth quarter of 2019.

Just under 1 percent of LabCorp's diagnostics business growth came from acquisitions with another 1 percent coming from favorable currency translation, the Burlington, North Carolina-based firm said. The 50 percent increase in organic revenues was composed of a 46 percent increase in COVID-19 testing and a 4 percent increase in the company's base testing business. Diagnostics revenues experienced a negative impact from the Protecting Access to Medicare Act (PAMA) of .6 percent, the firm said. Test volumes (measured by requisitions) were up 34 percent during the quarter with acquisitions contributing less than 1 percent. Base testing volumes were down 8 percent.

On a conference call following release of the earnings results, LabCorp Chairman and CEO Adam Schecter said that while the company's base testing business has recovered since the spring, volumes remain below their prior year levels.

Glenn Eisenberg, LabCorp executive vice president and CFO, said on the call that in Q4 the company posted its best year-over-year volume performance for its base business since the start of the pandemic. He added that the decline in routine testing volumes was offset by a more favorable price mix, which he attributed to a higher number of tests being performed per requisition, perhaps due to patients making fewer doctor visits but conducting more tests per visit. He added that the company expected the currently favorable mix would return to historical levels as business returned to normal.

Schechter said that in addition to traditional COVID-19 testing, LabCorp was currently sequencing "a couple thousand" virus samples per week for the US Centers for Disease Control and Prevention.

"We can increase that significantly," he said. "We are working with [CDC] to see what numbers they would like us to go to."

On the lab acquisition front, Schechter said that LabCorp was "seeing more opportunities" for acquisitions of hospital and local laboratories and was "spending a lot more time in discussions with various hospitals and local laboratories," echoing comments made this month by Quest Diagnostics regarding the acquisition landscape.

Net earnings attributable to LabCorp for Q4 were $938.3 million, or $9.54 per share, compared to net earnings of $227.1 million, or $2.32 per share, in the same quarter last year. Adjusted EPS for Q4 2020 was $10.56, beating the consensus Wall Street estimate of $8.11.

The company's SG&A costs were $518.0 million, up 25 percent from $413.9 million in the same quarter last year.

For full-year 2020, revenues were $13.98 billion, up 21 percent from to $11.55 billion in 2019 and beating analysts' average estimate of $13.52 billion. The diagnostics division posted $9.25 billion in revenues, up 32 percent from $7.0 billion in 2019. Full-year revenues in the Covance business grew 7 percent to $4.88 billion from $4.58 billion.

Acquisitions contributed just under 2 percent to full-year 2020 revenues, while foreign currency translation contributed under 1 percent and disposition of business had a negative impact of less than 1 percent, LabCorp said. The 19 percent increase in organic revenue comprised a 24 percent contribution from COVID-19 testing and a 5 percent reduction in base testing. PAMA contributed a negative impact of .6 percent.

Net earnings for the year attributable to LabCorp were $1.56 billion, or $15.88 per share, compared to $823.8 million, or $8.35 per share, in 2019. Adjusted EPS for full-year 2020 was $23.94, beating the consensus Wall Street estimate of $21.35.

For 2020, LabCorp spent $1.73 billion on SG&A, up 7 percent from $1.62 billion in 2019.

The company finished 2020 with cash and cash equivalents of $1.32 billion.

For 2021, LabCorp projected year-over-year revenue change ranging from a decline of 1 percent to an increase of 5 percent and adjusted EPS of between $19.00 and $23.00 per share.

Eisenberg said the company expects its base testing business will grow between 11 percent and 14 percent in 2021 compared to 2020 while COVID-19 revenue will decline 35 percent to 50 percent year-over-year.

On Thursday morning trading on the New York Stock Exchange, LabCorp shares were up 4 percent to $238.85.