Third-quarter earnings grew steadily at Burlington, N.C.-based Laboratory Corporation of America, mostly due to the acquisition of drug development firm Covance.
LabCorp picked up the Princeton, N.J.-based firm in February for about $6.2 billion. In the third quarter, the Covance acquisition was responsible for nearly all of LabCorp's 47% revenue growth to $2.27 billion for the three months ended Sept. 30.
Roughly 5% of LabCorp's revenue growth was driven by organic volume, price and smaller acquisitions. LabCorp said the strong dollar offset its revenue and earnings.
LabCorp reported $152.8 million in income, up 11% from Sept. 30, including gains from Covance. On a pro forma basis, as if the acquisition closed in January 2014, Covance revenue increased 3% to $669 million during the quarter. That led to $97 million in adjusted operating income, up 10% from the same period the year before.
The company's bread and butter, its diagnostics segment, reported $1.6 billion in revenue, up 5% from the third quarter of 2014. Adjusted operating income was $330.2 million, up 8% during the same period the prior year.
LabCorp's nine-month revenue was $6.26 billion, up 39% from the year before, thanks almost entirely to Covance, which was responsible for 34.2% of revenue growth, or $1.54 billion. Income so far this year was $322.6 million, down 18%, even with Covance.
The drop in year-to-date earnings was in part due to restructuring charges and other special items amounting to $248 million, as the company continues to implement its Project LaunchPad cost-cutting initiative.
LabCorp updated its guidance for the year, expecting revenue growth of about 41%, including the effects of unfavorable currency rates. The company expects its diagnostics segment to grow 4.5% to 5.5%, while Covance is expected to see a -0.5% to 0.5% change in revenue.
The company expects to report about $7.80 to $7.95 adjusted earnings per share for the year, versus previous guidance of $7.75 to $8. Both estimates are up from the $6.80 per share reported last year.
