LabCorp Has COVID-19 Headwinds in 2022, but Our Fair Value Estimate Is Unchanged

LabCorp posted full-year results that ran ahead of our expectations on the top and bottom lines for 2021. However, that outperformance was offset after adjusting our 2022 projections downward as demand for COVID-19 testing wanes, and we’re standing behind our $271 fair value estimate. LabCorp’s 10% revenue decline in the fourth quarter, which reflected COVID-19 test revenue falling 15% year over year, was modestly better than we’d expected thanks to 5% growth in nonpandemic tests. Despite the late fourth-quarter surge of the omicron variant, which drove up test demand that has spilled over into early 2022, we now expect COVID-related revenue to fall roughly 70% in 2022. However, robust growth of other tests should partially compensate for that decline. We saw little in the quarter to shift our thinking on LabCorp’s narrow moat.