The last time Laboratory Corporation of America (LH +1.32%) announced its quarterly results, there wasn't much to be excited about. Revenue fell 2% year over year while adjusted earnings dropped 6%.
Investors learned how LabCorp performed in Q2 on Thursday after the company providing a quarterly update before the market opened. Here's what you need to know about the LabCorp's second-quarter results.
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By the numbers
LabCorp reported Q2 revenue of $2.88 billion, a 0.5% increase from the $2.87 billion posted in the same quarter of the previous year. However, the company's revenue was a tad bit lower than analysts' average estimate of $2.89 billion.
The company announced net income of $1.93 per share as reported under generally accepted accounting principles (GAAP). This represented a 15% decrease from $2.27 per share in the prior-year period.
Adjusted net income came in at $2.93 per share. While this reflected a 1.7% year-over-year decline, it narrowly beat analysts' average estimate of $2.92 per share.
The company ended the second quarter with a cash balance of $265.4 million and debt totaling $6.6 billion. LabCorp bought back around 1.3 million shares during the quarter, using nearly $200 million of its cash. The company also invested $656.4 million in acquisitions.
Behind the numbers
Sales rose slightly for LabCorp in Q2 due to acquisitions and organic growth. Acquisitions accounted for 1.4% of the company's revenue growth, while organic growth generated 1.7%. This was partially offset, however, by the sale of a business unit and foreign currency fluctuations.
LabCorp's bottom line worsened from the prior-year period for several reasons. One key factor behind this decline was lower Medicare and Medicaid pricing resulting from the federal Protecting Access to Medicare Act, also known as PAMA. Higher personnel costs, cybersecurity expenses, and costs related to special items from acquisitions and dispositions also contributed to the company's lower earnings.
One bright spot for LabCorp in the second quarter was the performance of its Covance drug development segment. Revenue for the segment increased 6.8% year over year to $1.13 billion. This growth was driven by higher organic demand and acquisitions.
Looking ahead
LabCorp now projects full-year 2019 non-GAAP EPS will be between $11.10 and $11.40, a narrowing from its previous guidance of 11.05 to $11.45. The company expects 2019 revenue will increase by 1% to 2% over the prior-year total of $11.33 billion. LabCorp previously projected full-year revenue growth between 0.5% and 2.5%.
CEO David King stated that LabCorp remains "well-positioned to drive growth in 2019 and the years to come." Earnings should be helped by the company's Diagnostics Launchpad initiative, which is expected to deliver savings of around $200 million by the end of 2021. While LabCorp's diagnostics business appears likely to struggle throughout the rest of the year, its Covance drug development segment should continue to deliver solid growth.
