Laboratory Corporation of America (NYSE:LH) Q3 Earnings: What Can You Expect?

in EARNINGS/INVESTING IDEAS by

Laboratory Corporation of America Holdings (NYSE:LH) is scheduled to report Q3 earnings results before markets open for trading on October 27, 2020.

The company is expected to report earnings of $5.25/share on revenue of $3.62 billion. The consensus earnings per share (EPS) of $5.25/share is based on a poll of 14 analysts and represents a growth in eps of 80.9% over the same quarter last year, when the company reported earnings of $2.90/share.

The revenue forecast of $3.62 billion based on a poll of 12 analysts implies a year-over-year (YoY) growth in revenue of 23.6%. Last year the company reported $2.929 billion in revenue for the quarter.

Expected to report EPS growth of 80.9% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $3,620.01 $2,928.50 23.6%
EPS $5.25 $2.90 80.9%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and missed expectations 1 quarters.

What are your expectations from Laboratory Corporation of America Holdings for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.99 $2.57 158.8% Beat
Q1, 2020 $1.95 $2.37 21.6% Beat
Q4, 2019 $2.80 $2.86 2.1% Beat
Q3, 2019 $2.85 $2.90 1.8% Beat
Q2, 2019 $2.92 $2.93 0.3% Beat
Q1, 2019 $2.54 $2.62 3.3% Beat
Q4, 2018 $2.49 $2.52 1.2% Beat
Q3, 2018 $2.89 $2.74 −5.1% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −3.3%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 28, 2020 $201.30 $194.61 −3.3% Decline
April 29, 2020 $175.96 $164.45 −6.5% Decline
February 13, 2020 $187.51 $195.28 4.1% Increase
October 24, 2019 $169.05 $165.69 −2.0% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.76, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.76 implies a 0.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

Laboratory Corporation of America Holdings is currently trading at $205.21/share, up 2.7% for the day. The company is trading at approximately 99.1% of its 52-week high of $207.03/share. The company’s stock price is up 5.4% since the last earnings report and up 6.4% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 76.94 suggests the company is trading in technically overbought territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:LH Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 55.18 and a forward P/E multiple of 13.76.

Laboratory Corporation of America Holdings’s current share price also implies a price-to-book (P/B) multiple of 2.72. The following table summarizes some other key fundamental ratios:

Data as of October 21, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $205.21
P/E Ratio 55.2x
P/E Ratio (Fwd) 13.8x
PEG Ratio −1.0
Total Debt / Total Capital 26.7%
Levered Free Cash Flow $1.174 billion
EV / EBITDA 14.6x

Finbox

Laboratory Corporation of America Holdings is a large-cap stock with a market capitalization of $19.987 billion and a total enterprise value of $26.562 billion. The company operates in the Healthcare sector and the Healthcare Providers & Services industry.

Laboratory Corporation of America Holdings operates as an independent clinical laboratory company worldwide. It operates in two segments, LabCorp Diagnostics (LCD) and Covance Drug Development. It offers various clinical laboratory tests, such as blood chemistry analyses, urinalyses, blood cell counts, thyroid tests, Pap tests, hemoglobin A1C and vitamin D products, prostate-specific antigens, tests for sexually-transmitted diseases, hepatitis C tests, microbiology cultures and procedures, and alcohol and other substance-abuse tests. The company also provides testing services in the areas of women’s health, allergy, diagnostic genetics, cardiovascular and infectious disease, endocrinology, oncology, coagulation, pharmacogenetics, toxicology, and medical drug monitoring; and esoteric testing, cancer diagnostics, and other procedures. In addition, it provides a suite of applications to enable patients, healthcare providers, health systems, accountable care organizations, and insurers with access to LCD’s data and services, as well as billing for laboratory services. Further, it offers end-to-end drug development, medical device, and diagnostic development solutions from research to clinical development and commercial market access. The company primarily serves managed care organizations, biopharmaceutical companies, physicians and other healthcare providers, hospitals and health systems, governmental agencies, employers, patients and consumers, contract research organizations, academic institutions, and independent clinical laboratories. Laboratory Corporation of America Holdings has collaborations with the Boston University, Columbia University, Duke University, Johns Hopkins University, The Mount Sinai Hospital, the University of Tennessee, Yale University, and QIAGEN N.V; and Ciox Health for the creation of COVID-19 patient data registry in the United States. The company was founded in 1971 and is headquartered in Burlington, North Carolina.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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