Labcorp’s third quarter results met Wall Street’s revenue expectations, but the market responded negatively, reflecting investor concerns about profitability and future growth levers. Management attributed the quarter’s performance to robust organic growth in its Diagnostics segment—especially through increased demand for specialty and genetic testing platforms like Invitae. CEO Adam Schechter explained that "margin for the quarter improved 100 basis points, driven by Diagnostics," and highlighted the positive impact of recent acquisitions and expanded partnerships. The company also initiated site consolidations in lower-performing areas of its Biopharma Laboratory Services to streamline operations and improve future income.
Is now the time to buy LH? Find out in our full research report (it’s free for active Edge members).
Labcorp (LH) Q3 CY2025 Highlights:
- Revenue: $3.56 billion vs analyst estimates of $3.56 billion (8.6% year-on-year growth, in line)
- Adjusted EPS: $4.18 vs analyst estimates of $4.14 (1% beat)
- Adjusted EBITDA: $614.8 million vs analyst estimates of $605.1 million (17.3% margin, 1.6% beat)
- Management slightly raised its full-year Adjusted EPS guidance to $16.33 at the midpoint
- Operating Margin: 11.1%, up from 7.7% in the same quarter last year
- Organic Revenue rose 6.2% year on year vs analyst estimates of 5.2% growth (95.4 basis point beat)
- Market Capitalization: $21.37 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Labcorp’s Q3 Earnings Call
- Lisa Gill (JPMorgan) asked about the drivers behind updated revenue guidance and the breakdown of currency versus acquisition impacts. CEO Adam Schechter clarified that delays in acquisition closings and foreign exchange were the primary factors, and that organic volume increases remain the main growth driver.
- Jack Meehan (Nephron Research) sought more detail on the Early Development site consolidation, questioning the earnings impact. Schechter explained the revenue loss would be offset by margin improvements, as noncore areas were dilutive.
- Patrick Donnelly (Citi) focused on how Labcorp plans to mitigate the $100 million potential PAMA impact in 2026. Schechter reiterated advocacy efforts and highlighted ongoing cost-saving measures, particularly through AI and the LaunchPad initiative.
- Erin Wright (Morgan Stanley) inquired about the contribution and margin profile of the consumer-driven testing business. Schechter said growth is accelerating but has not yet reached critical mass for separate disclosure, with continued investment in new test offerings.
- Anna Krasinski (Barclays) asked if Labcorp’s hospital M&A criteria had shifted amid a robust deal pipeline. Schechter stated the company remains open to lower-margin hospital assets if they offer high returns on capital or strategic market entry.
Catalysts in Upcoming Quarters
As we look forward, the StockStory analyst team will be closely watching (1) the pace of specialty test adoption and Labcorp’s ability to further expand partnerships with health systems and regional labs, (2) the successful execution and integration of recent acquisitions and site consolidations, and (3) progress on AI-driven operational efficiency initiatives aimed at offsetting cost and reimbursement pressures. Regulatory developments, particularly surrounding PAMA, will also be critical to monitor.
Labcorp currently trades at $257.84, down from $275.54 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).
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