Lab Corp. (LH) Lowers FY EPS Guidance
LabCorp (NYSE: LH) today updated its full-year 2018 guidance based on current expectations. In the following guidance, all comparisons to financial results in 2017 have been restated as if the Company had adopted the FASB-issued converged standard on revenue recognition (ASC 606) on January 1, 2017. The guidance continues to assume foreign exchange rates effective as of September 30, 2018, for the remainder of the year, and includes capital allocation.
Current Guidance Provided | Prior Guidance Provided | |||
| Total Revenue Growth | 9.9% to 10.3% | 10.5% to 11.0% | ||
| LabCorp Diagnostics Revenue Growth | 2.1% to 2.5% | 3.0% to 3.5% | ||
| Covance Drug Development Revenue Growth | 24.0% to 26.0% | 24.0% to 26.0% | ||
| Adjusted EPS | $10.95 to $11.05 | $11.25 to $11.45 | ||
| Free Cash Flow | $940 million to $980 million | $975 million to $1,025 million |
(Street sees FY EPS of $11.35)
The Company’s revised outlook was primarily driven by lower-than-expected volume growth in LabCorp Diagnostics, which the Company believes will continue for the remainder of the year. The softness in demand is primarily due to slower growth in referred direct-to-consumer genetic testing, lower referral volume from hospitals and health systems, volume declines from certain managed care plans that will no longer be exclusive to LabCorp in 2019, and adverse weather. As stated on the third quarter earnings call, the Company has implemented cost reduction initiatives, but these initiatives will be insufficient to maintain the Company’s prior outlook in light of the unanticipated volume shortfall.
“We are disappointed with this shortfall in Diagnostics but continue to be confident in our outlook in Covance Drug Development,” said David P. King, chairman and chief executive officer. “Looking to next year, we continue to expect modest EPS growth over our updated 2018 earnings. As a global leader in life sciences, our differentiated offering positions us to create significant long-term shareholder value.”
The Company expects to report its financial results for 2018 and provide guidance for 2019 on its fourth-quarter earnings call, scheduled for February 7, 2019.