LabCorp Earnings: Solid Underlying Nonpandemic Test Demand Offsets Declines in COVID Tests

LabCorp delivered third-quarter results that closely track with our full-year topline expectations. Gross margin year-to-date has run slightly behind our projections, but that was partially offset by operational costs, which have run lower than we'd expected. These slight adjustments to our model weren't enough to materially move our $233 fair value estimate. Narrow-moat LabCorp continues to put the COVID-19 disruption in the rearview mirror, and the quarterly decline in pandemic test revenue was comparable to that seen at rival Quest. Perhaps more importantly, LabCorp's non-COVID quarterly test volume and price/mix were up 7% and 9%, respectively, year over year. While some of this strength relied on the new Ascension lab management deal, base business on these measures remained decent on an organic basis. We think this growth suggests solid underlying dynamics for reference labs heading into 2024.