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Here's Why LabCorp Is Tanking Today

By Brian Feroldi - Updated Nov 30, 2018 at 10:50AM

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Shares nosedive after management dials back full-year guidance. Here are the must-know details for investors.

What happened

Following a downward revision to the company's full-year guidance, shares of LabCorp (LH 2.81%), a leading provider of clinical testing services, dropped 10% as of 10:20 a.m. EST on Friday.

So what

LabCorp isn't having as good of an end to its fiscal year as management had expected. In response, the company decided to cut its guidance.

Here's an overview of the change:


New Guidance

Prior Guidance

Total revenue growth 9.9% to 10.3% 10.5% to 11%
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 billion

Data source: LabCorp. EPS = earnings per share. 

For context, Wall Street was projecting that LabCorp's full-year adjusted earnings per share would be about $11.35. 

Management blamed the downward revision on "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."

The company also reaffirmed its commitment to cut costs in response to the shortfall.

Distressed-looking woman sitting at a table with laptop in front of her.

Image source: Getty Images.

Here's the commentary that CEO David King shared with investors:

We are disappointed with this shortfall in Diagnostics but continue to be confident in our outlook in Covance Drug Development. 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.

Management's call for long-term prosperity appears to be falling on deaf ears today.

Now what

Weaker-than-expected demand is never welcome news. It is possible that today's update might cause some Wall Street analysts to re-evaluate their projection of double-digit profit growth over the next several years. If that happens, then LabCorp might not be the bargain that it appears to be.

The company's next earnings report is scheduled for Feb. 7. Bulls and bears alike will want to tune in for an update on the company's progress.

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