Shares of Laboratory Corp. of America (LH 1.38%), also known as Labcorp, were down more than 13% as of 12:15 p.m. ET on Monday after the company announced it had completed its spinoff of Fortrea Holdings (NASDAQ: FTRE), a contract research organization. The stock is up more than 2% this year.
Labcorp is a healthcare diagnostics and laboratory services company, with more than 60,000 employees and clients in more than 100 countries. The company said more than 80% of the new drugs the Food and Drug Administration (FDA) approved last year were worked on by Labcorp.
The move downward was just a simple case of investors selling on the news, as the anticipation of which had already helped raise the stock's price more than 11% over the past month. The deal is generally positive for Labcorp, as Fortrea was paying Labcorp roughly $1.6 billion for assets connected with the deal. Labcorp said it was using the money to pay down debt and toward a $1 billion share repurchase program. Fortrea began trading on the Nasdaq on Monday, and each Labcorp investor was given a share of Fortrea for every share of Labcorp they owned.
Labcorp is coming off a lackluster first-quarter report. It said it had quarterly revenue of $3.78 billion, down 40% year over year, and earnings per share (EPS) of $2.39, compared to $5.23 in the same period last year.
The culprit is that the company's COVID-19 testing was down, so that trend will likely continue. Labcorp downgraded guidance to say it expected 2023 adjusted EPS of $16.25, down from earlier estimates of $17.75.