Laboratory Corporation of America Holdings (NYSE:LH) has sailed through the turbulent waters of 2020 pretty well so far. The life sciences company beat expectations with its first-quarter results announced in April. And its shares were up 19% as of the market close on Monday.
That nice run was in jeopardy, though, as LabCorp announced its second-quarter results before the market opened today. Here are the highlights from the company's Q2 update.
By the numbers
LabCorp reported Q2 revenue of $2.8 billion, a 4% year-over-year decline. But this result still topped the average analysts' revenue estimate of $2.5 billion.
The company announced net income in the second quarter of $231.6 million, or $2.37 per share, based on generally accepted accounting principles (GAAP). This reflected solid improvement from GAAP net income of $190.4 million, or $1.93 per share, posted in the prior-year period.
LabCorp recorded adjusted earnings of $2.57 per share in the second quarter, down 12% year over year. But this adjusted earnings figure blew past the consensus Wall Street estimate of $0.99 per share.
Behind the numbers
That year-over-year revenue decline of 4% was actually worse than it appears at first glance. Acquisitions boosted LabCorp's revenue by 1.9%. After adjusting for the disposition of a business and currency headwinds, the company's organic revenue fell 5.4% from the prior-year period.
There was one glaring culprit behind the revenue decline: the COVID-19 pandemic. LabCorp said that its base-business organic sales plunged 20.9% year over year due to the coronavirus outbreak. But the company quickly rolled out COVID-19 testing services, and these new services helped to largely offset the steep decline in base business revenue.
Revenue fell in Q2 for both of LabCorp's business segments. The company reported revenue of $1.69 billion in its diagnostics business, down 3.9% year over year. Covance drug development revenue slipped 2.9% to $1.09 billion.
LabCorp's increased earnings resulted primarily from funding from the U.S. government's coronavirus stimulus bill earlier this year. The company stated that the CARES Act funds boosted its GAAP earnings by $55.9 million, or $0.42 per share. Its adjusted earnings, however, excluded assistance from the CARES Act.
The company withdrew its full-year 2020 guidance in April. With the uncertainty created by the COVID-19 pandemic, LabCorp decided that it would continue to hold off on providing full-year guidance. But the company said that its "outlook has improved across the enterprise" despite some areas still being affected by the pandemic.
In particular, LabCorp stated that its diagnostics business continues to recover from its bottom in April, and its COVID-19 testing continues to grow. Meanwhile, the company's Covance business is working on efforts supporting the development of coronavirus vaccines and therapies.
It's possible, though, that the healthcare stock could be volatile in future months, especially if the pandemic intensifies in the fall.