Labcorp Q4 Earnings & Revenues Beat, Margins Down, Stock Tumbles

Labcorp Holdings LH, or Labcorp, reported adjusted earnings per share (EPS) of $3.45 in the fourth quarter of 2024. The figure rose 4.5% from the year-ago level.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.The adjusted figure excludes the impact of certain amortization expenses and restructuring charges, among others. The bottom line beat the Zacks Consensus Estimate by 1.5%.On a GAAP basis, EPS in the fourth quarter was $1.70 compared to a loss of $1.95 in the year-ago period.For the full year, adjusted earnings were $14.57 per share, up 7.4% from the year-ago period. The metric topped the Zacks Consensus Estimate by 0.4%.  Revenues in the quarter under review rose 9.8% year over year to $3.33 billion. The figure surpassed the Zacks Consensus Estimate by 0.6%.The increase was due to organic revenues of 5.4%, acquisitions, net of divestitures, of 4% and a foreign currency translation gain of 0.3%. The 5.4% increase in organic revenues was driven by a 6.2% rise in the company's organic Base Business, partially offset by a 0.8% decline in PCR testing (COVID-19 Testing).Total revenues for 2024 were $13.01 billion, up 7% from the year-ago period’s levels. The figure beat the Zacks Consensus Estimate by 0.2%.Following the announcement, Labcorp shares fell 3.2% in the pre-market session today.Labcorp’s Q4 Performance by SegmentsThe company currently operates under two segments — Diagnostics Laboratories and Biopharma Laboratory Services (comprised of its Central Laboratories and Early Development Research Laboratories).For the fourth quarter, Diagnostics Laboratories reported revenues of $2.59 billion, reflecting a 10.2% improvement year over year.Labcorp Price, Consensus and EPS Surprise Labcorp price-consensus-eps-surprise-chart | Labcorp QuoteOn an organic basis, revenues were up 5.1%, driven by a 6.1% increase in the Base Business, partially offset by a 1% decline in COVID-19 testing. The company’s total volumes (measured by requisitions) increased 6.8%, as acquisition volumes contributed 2.8% and organic volumes rose 4%.Biopharma Laboratory Services revenues rose 10.4% to $767 million in the fourth quarter. The year-over-year increase was primarily driven by organic growth of 8.9% and a foreign currency translation gain of 1.5%.Labcorp’s Margin PerformanceThe gross margin contracted 16 basis points (bps) to 26.9% in the fourth quarter due to a 9.1% rise in the cost of revenues.The adjusted operating income improved 4.4% year over year to $301.1 million. However, the adjusted operating margin contracted 47 bps year over year to 9%. This was due to an 11.7% rise in SG&A expenses ($595.2 million).  Labcorp’s Cash PositionLabcorp exited the fourth quarter with cash and cash equivalents of $1.52 billion compared with $536.8 million at the end of 2023. Long-term debt (excluding the current portion) totaled $5.33 billion, up 31.5% from the second quarter’s figure. Cumulative cash inflow from operating activities at the end of the fourth quarter was $1.59 billion compared with $1.20 billion at the end of 2023.A Snapshot of LH’s 2025 GuidanceTotal revenues for 2025 are expected to grow in the range of 6.7-8%. Diagnostics Laboratories revenues are expected to increase in the range of 6.5-7.7%.Total Biopharma Laboratory Services revenues are expected to rise in the range of 3%-5% in 2025.The Zacks Consensus Estimate for full-year revenues is pegged at $13.84 billion.LH expects full-year adjusted EPS to be in the band of $14.57-$15.60. The Zacks Consensus Estimate for the metric is pegged at $15.97.The company expects 2024 free cash flow from continued operations to be in the range of $1.10-$1.25 billion.Our View on LHLabcorp exited the fourth quarter of 2024 with better-than-expected earnings and revenues. The company delivered strong organic and inorganic growth in 2024. Labcorp strengthened its presence in key high-growth areas, including oncology, women's health, neurology and autoimmune disease. Labcorp advanced its position as a partner of choice for hospitals, health systems and regional/local laboratories and also continued to make strides in science, technology and innovation.The company introduced enhancements to Global Trial Connect aimed at increasing the speed of clinical trials. It also expanded the Labcorp OnDemand test menu with new offerings to help consumers manage their health and well-being. Furthermore, Labcorp announced the availability of the first companion diagnostic assay to identify gastric cancer patients eligible for targeted treatment for people with advanced cancer of the stomach.Meanwhile, the contraction of both margins in the quarter is discouraging.LH’s Zacks Rank and Key PicksLabcorp currently carries a Zacks Rank #3 (Hold).Some better-ranked stocks from the broader medical space are ResMed RMD, Cardinal Health CAH and Bio-Rad Laboratories BIO.ResMed reported second-quarter fiscal 2025 adjusted EPS of $2.43, which topped the Zacks Consensus Estimate by 5.6%. Revenues of $1.28 billion exceeded the Zacks Consensus Estimate by 1.6%. RMD carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.RMD has an estimated fiscal 2025 earnings growth rate of 21.9% compared with the industry’s 13.2%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.9%.Cardinal Health, carrying a Zacks Rank #2, posted second-quarter fiscal 2025 adjusted EPS of $1.93, topping the Zacks Consensus Estimate by 10.3%. Revenues of $55.26 billion exceeded the Zacks Consensus Estimate by 0.7%.CAH has an estimated five-year earnings growth rate of 10.7% compared with the industry’s 9.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%.Bio-Rad Laboratories, carrying a Zacks Rank #2, posted third-quarter 2024 adjusted EPS of $2.01, topping the Zacks Consensus Estimate by 57%. Revenues of $649.7 million exceeded the Zacks Consensus Estimate by 2%.BIO has an earnings yield of 3.3% compared with the industry’s 0.6% yield. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 30.5%.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.3% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Labcorp (LH): Free Stock Analysis Report Cardinal Health, Inc. (CAH): Free Stock Analysis Report ResMed Inc. (RMD): Free Stock Analysis Report Bio-Rad Laboratories, Inc. 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