LabCorp Earnings: Solid Demand Supports Robust Growth in Base Business, Aided by Ascension Deal

LabCorp delivered solid second-quarter results that offered the first peek into what LabCorp’s financials look like following the spinoff of the Fortrea drug development business. While the remaining biopharma lab services revenue is slightly smaller than we’d expected, this was largely offset by stronger growth in the diagnostic lab segment that we anticipate should continue through the year, as well as a slightly higher long-term earnings growth profile now that the lower-margin drug development business has been shed. As a result, we’re leaving our fair value estimate unchanged. We remain confident in LabCorp’s compelling cost structure that underpins its narrow economic moat. This firm has long been a superior operator in the reference lab industry, in our view. We expect this dynamic to become more evident again as the firm refocuses on diagnostic labs.