Lab Corp. (NYSE: LH) reported Q2 EPS of $2.98, $0.04 better than the analyst estimate of $2.94. Revenue for the quarter came in at $2.9 billion versus the consensus estimate of $2.85 billion.

• Q2 revenue of $2.9 billion, up 13% over $2.5 billion last year
• Q2 diluted EPS of $2.27, up 28% from $1.78 last year; Q2 adjusted EPS of $2.98, up 23% over $2.43 last year
• Q2 free cash flow of $280 million, up 16% over $241 million last year
• 2018 adjusted EPS guidance of $11.35 to $11.65, up 23% to 26% over 2017
• 2018 free cash flow guidance of $1.1 billion to $1.2 billion

“We delivered another quarter of strong growth and disciplined capital deployment across our integrated enterprise, with double-digit increases in revenue and adjusted EPS over last year,” said David P. King, chairman and CEO. “The Drug Development business drove continued organic revenue growth and strong margin improvement, while winning and expanding strategic partnerships that will contribute to future study awards. The Diagnostics business expanded opportunities with key partners, and achieved solid results despite the negative impact from the implementation of PAMA. As a global leader in the expanding life sciences industry, our differentiated offering strengthens our ability to overcome segment-specific challenges, and create significant value for stakeholders now and for years to come.”

Outlook for 2018

In the following guidance, all financial results in 2017 and comparisons to financial results in 2017 have been restated in this press release as if the Company had adopted ASC 606 on January 1, 2017. The guidance assumes foreign exchange rates effective as of June 30, 2018 for the remainder of the year, and includes capital allocation.

• Revenue growth of 10.5% to 11.5% over 2017 revenue of $10.31 billion, which includes the benefit of approximately 50 basis points of foreign currency translation. This is in-line with the prior guidance of 10.0% to 12.0%, as the increased revenue guidance in Covance Drug Development is offset by the previously-announced divestiture of the Food Solutions business.
• Revenue growth in LabCorp Diagnostics of 3.0% to 4.5% over 2017 revenue of $6.86 billion, which includes the negative impact of PAMA as well as the benefit of approximately 20 basis points of foreign currency translation. This is lower than the prior guidanceof 3.5% to 5.5% due to the previously-announced divestiture of the Food Solutions business.
• Revenue growth in Covance Drug Development of 23.0% to 26.0% over 2017 revenue of $3.45 billion, which includes the benefit of approximately 110 basis points of foreign currency translation. This is an increase over the prior guidance of 21.0% to 25.0% due to higher investigator and other pass-through revenues, partially offset by the change in foreign currency translation.
• Adjusted EPS of $11.35 to $11.65, which is an increase of approximately 22.7% to 25.9% over 2017 adjusted EPS of $9.25, and a narrowing of the range compared to prior guidance of $11.30 to $11.70.
• Free cash flow (operating cash flow less capital expenditures) of $1.1 billion to $1.2 billion, compared to $1.1 billion in 2017, unchanged from prior guidance.

GUIDANCE:

Lab Corp. sees FY2018 EPS of $11.35-$11.65, versus the consensus of $11.57.

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