|LabCorp CEO David King|
A spike in costs dragged LabCorp's ($LH) profits down yet again in the second quarter, wiping out modest sales growth as the diagnostics giant sobers up about its full-year earnings potential.
LabCorp's revenue grew 3.1% to $1.5 billion on the quarter, but, thanks to a 5.6% jump in cost of sales and a $6.6 million restructuring charge, net profits slipped about 1% to $151.9 million. The company still expects 2% to 3% revenue growth for 2013, good for up to $5.8 billion, but it has dialed back its full-year earnings outlook to $6.90 to $7.10 a share, a 1% reduction from its earlier best-case guidance.
That $6.6 million restructuring charge breaks down to $2.5 million on LabCorp's ongoing layoffs and $4.5 million to close and integrate facilities, a bite lessened with $400,000 in unused reserves, the company said.
Testing volume grew 5% on the quarter, but LabCorp's revenue per requisition dropped 1.8%, reflecting Medicare payment reductions, delays and denials of coverage, the company said. LabCorp and other diagnostics outfits are caught in a tough market for testing, as changing reimbursement codes and sequestration cuts put the squeeze on lab testing services.
That said, LabCorp has been working to diversify its offerings and increase share value, amping up its clinical trial segment and, buoyed by its $241 million buyout of Medtox last year, boosting its toxicology testing revenue. Last quarter, the company bought back 3.7 million of its shares for $362 million, and LabCorp has another $592.1 million earmarked for future repurchases.
"We are proud that we continued to manage the business well in a difficult operating environment and continued our commitments both to growing the business and returning capital to our shareholders through increased share repurchase," CEO David King said in a statement.
- read LabCorp's full results