Laboratory Corporation of America Holdings
) reported a better-than-expected second-quarter 2014 with adjusted
earnings per share (EPS) of $1.84, up 2.2% year over year. Results
also steered ahead of the Zacks Consensus Estimate of $1.77.
According to the company, gain of 6 cents per share on the sale of
an investment as well as the company's share repurchase program
boosted the bottom line.
On a reported basis, after including amortization (15 cents),
restructuring and other special charges (5 cents), LabCorp's net
earnings came in at $141.3 million or $1.64 per share against net
earnings of $151.9 million or $1.62 per share in the year-ago
Laboratory Corporation Of America Holdings -
Quarterly EPS (BNRI) | FindTheBest
Quarter under Review
Revenues were up 3.3% year over year to $1,516.4 million in the
second quarter, beating the Zacks Consensus Estimate of $1,504
The company witnessed a 5.3% increase in testing volume
(measured by requisitions and fold-in acquisitions) which was
partially offset by a mix. On the other hand, the company reported
poor revenue per requisition (down 2.0% year over year) that
reflects Medicare payment reductions and unfavorable test mix. We
expect these challenges to also affect LabCorp's peer
) which is expected to release its second-quarter 2014 results on
Gross margin fell a huge 182 basis points (bps) to 37.5% in the
quarter. Adjusted operating income declined 8.6% year over year to
$270.7 million. This led to an adjusted operating margin of 17.9%,
down 234 bps from the year-ago quarter. During the quarter under
review, selling, general and administrative expenses shot up 6.1%
to $297.9 million.
LabCorp exited the quarter with cash and short-term investments of
$479.5 million compared with $404.0 million at the end of 2013. At
quarter-end, the company had no borrowings outstanding under its
$1.0 billion revolving credit facility. Operating cash flow for the
quarter was $207.4 million, an improvement from the year-ago level
of $137.6 million.
During the quarter, LabCorp repurchased stocks of $56.4 million
bringing its year-to-date share repurchase up to $162.6 million and
was left with $889.9 million of authorization under the approved
share repurchase plan. A consistent share buyback program led to a
7.9% decline in the outstanding share count.
Backed by an encouraging second quarter performance, LabCorp
increased its full-year 2014 EPS guidance to the range of $6.50 to
$6.75 from the earlier provided projection of $6.40 to $6.70. The
current Zacks Consensus Estimate of $6.68 falls within the revised
However, LabCorp still maintains its feeble revenue guidance for
2014 at a mere 2%. The current Zacks Consensus Estimate for
revenues is pegged at $5,910 million.
In addition, operating cash flow and capital expenditures are
expected to remain in the band of $780−$820 million and $185−$205
million respectively (unchanged from the previous guidance).
LabCorp posted a sequentially improved and better-than-expected
second quarter with both top and bottom-line beats. Significant
increase in test volume acted as the main impetus to the company's
top-line improvement in the reported quarter.
However, the current economic uncertainty continues to adversely
affect LabCorp. The volume environment still remains challenging
for testing laboratories and utilization weaknesses stands as
looming headwinds. We are also concerned about the Medicare payment
reductions (effective Jan 2013), molecular pathology codes and the
implementation of sequestration. In addition, margins also continue
to remain under pressure.
However, share repurchase activity continues to remain strong
providing significant cushion to the company's bottom line. Yet,
the still sluggish revenue outlook for 2014 implies that the
industry trend does not seem likely to improve in the near future.
However, LabCorp is working on portfolio expansion to drive its top
line. The company is focusing more on the high-margin esoteric
testing business, which is expected to contribute 45% of total
sales in the next 3-5 years.
The stock currently carries a Zacks Rank #2 (Buy). Some other
well-placed stocks in the same sector are
The Cooper Companies Inc.
), both carrying the same Zacks Rank as LabCorp.
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
QUEST DIAGNOSTC (DGX): Free Stock Analysis
AMERISOURCEBRGN (ABC): Free Stock Analysis
LABORATORY CP (LH): Free Stock Analysis Report
COOPER COS (COO): Free Stock Analysis Report
To read this article on Zacks.com click here.