Lab Corp. (LH) Tops Q4 EPS by 3c, Revenues Miss; Offers FY19 EPS Guidance

Lab Corp. (NYSE: LH) reported Q4 EPS of $2.52, $0.03 better than the analyst estimate of $2.49. Revenue for the quarter came in at $2.79 billion versus the consensus estimate of $2.79 billion.

• Revenue: Q4 of $2.8 billion, up 2% over 2017; Full year of $11.3 billion, up 10% over 2017
• Diluted EPS: Q4 of $1.56; Full year of $8.61
• Adjusted EPS: Q4 of $2.52, up 11% over 2017; Full year of $11.02, up 20% over 2017
• 2019 Adjusted EPS guidance of $11.00 to $11.40
• 2019 Free Cash Flow guidance of $950 million to $1.05 billion
• Commenced phase II of LabCorp Diagnostics’ LaunchPad business process improvement initiative, expected to generate $200 million of additional net savings over the next three years
• Board replaced the Company’s existing share repurchase plan with a new plan authorizing repurchase of up to $1.25 billion of stock

“LabCorp delivered another strong year in 2018, highlighted by 10% revenue growth and 20% adjusted EPS growth,” said David P. King, chairman and chief executive officer. “Our fourth quarter results included an excellent performance by Covance, with a strong 1.34 book to bill, constant currency organic revenue growth of over 9%, and margin expansion of approximately 300 basis points. Non-operational items constrained our Diagnostics business, but excluding those items, the fundamental revenue, margin and cash flow generation characteristics of the business remained strong, and we delivered organic volume growth and favorable mix. Both businesses continued to benefit from differentiated, data-driven solutions and growth opportunities derived from our competitive advantages in data and analytics, patient engagement, scientific innovation, and therapeutic expertise. The power of our Diagnostic-Drug Development combination is translating into unique solutions for patients, customers, and partners, positioning us to deliver growth and shareholder value in the years ahead.”

GUIDANCE:

Lab Corp. sees FY2019 EPS of $11.00-$1.40, versus the consensus of $11.21.

• Revenue growth of 0.5% to 2.5% over 2018 revenue of $11.33 billion, which includes the negative impact from the disposition of businesses of approximately 1% and foreign currency translation of approximately 0.4%.
• The change in revenue in LabCorp Diagnostics is expected to be -4.0% to -2.0% as compared to 2018 revenue of $7.03 billion, which includes the negative impact from the disposition of businesses of approximately 2%. Excluding the disposition of businesses, the change in revenue in LabCorp Diagnostics is expected to be approximately -2.0% to 0.0%, primarily due to organic volume growth, favorable test mix, and acquisitions, offset by the impact of PAMA of -1.6%, changes in certain managed care contracts and laboratory provider networks, as well as foreign currency translation of approximately 0.3%.
• Revenue growth in Covance Drug Development of 5.0% to 9.0% over 2018 revenue of $4.31 billion, which includes the negative impact from foreign currency translation of approximately 0.6%.
• Adjusted EPS of $11.00 to $11.40, a change of 0% to 3% as compared to $11.02 in 2018.
• Free cash flow (operating cash flow less capital expenditures) of $950 million to $1.05 billion, compared to $925.6 million in 2018.

For earnings history and earnings-related data on Lab Corp. (LH) click here.

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