It could be a lot worse. That's probably the thought that's gone through the minds of shareholders of Laboratory Corporation of America (NYSE:LH). The stock plunged more than 30% in March. But it's now up a little year to date after a major rebound in recent weeks.
The global life sciences company announced its first-quarter results before the market opened on Wednesday. Here are the highlights from LabCorp's Q1 update.
By the numbers
LabCorp reported revenue in the first quarter of $2.82 billion, a 1.2% year-over-year increase. It also topped the consensus Wall Street analysts' revenue estimate of $2.74 billion.
The company announced a Q1 net loss of $317.2 million, or $3.27 per share, based on generally accepted accounting principles (GAAP). This reflected a steep decline from the GAAP net income of $185.6 million, or $1.86 per share, recorded in the same quarter of 2019.
On a non-GAAP adjusted basis, LabCorp's net income in the first quarter was $2.37 per share. Although this result was well below the adjusted earnings of $2.62 per share posted in the prior-year period, it handily beat the average analysts' adjusted earnings estimate of $1.95 per share.
Behind the numbers
LabCorp's total Q1 revenue increased because of acquisitions. However, sluggish organic growth largely offset the gains from the company's acquisitions. Lower Medicare and Medicaid pricing also weighed down revenue growth.
The company's Covance drug development segment performed relatively well in the first quarter, with revenue rising 6.4% year over year to $1.07 billion. Acquisitions generated revenue growth of 6.2%. Covance's organic revenue grew by 1.6%. But the sale of a business offset this growth by around 1.2%, with currency fluctuations negatively impacting growth by another 0.1%.
LabCorp's diagnostics segment, on the other hand, didn't fare as well in Q1. Revenue for the segment fell 1.2% year over year to $1.72 billion. The primary factors behind this decline were the negative impact of the COVID-19 pandemic and lower Medicare and Medicaid pricing.
COVID-19 also was the main reason for the company's GAAP earnings decline. LabCorp stated that the economic conditions spurred by the viral outbreak caused it to record an impairment of $437.4 million to goodwill and other assets. In addition, the company incurred $21.9 million in other costs related to COVID-19.
LabCorp said that it started off 2020 on a positive footing. However, the demand for diagnostic testing plunged by at least 50% from normal levels at the end of the first quarter due to the COVID-19 pandemic. Covance was also negatively impacted by the COVID-19 outbreak as some clients slowed clinical trials.
Some healthcare stocks won't be affected all that much by the COVID-19 pandemic, but it's a different story for LabCorp. Because of the uncertainty surrounding the impact of the coronavirus crisis, LabCorp withdrew its full-year 2020 guidance. The company also has temporarily suspended its share repurchase program.
CEO Adam Schechter, though, said, "Looking forward, despite the unpredictability of this health crisis, we are well positioned financially and strategically to continue to serve our customers and drive long-term shareholder value." LabCorp stated that it continues to expect to generate "solid" adjusted earnings per share and free cash flow this year.