LabCorp’s CEO: 5 Keys To Winning
May 27, 2015
LabCorp’s CEO: 5 Keys To Winning
Laboratory Corp
• #2 lab services company.
• $5.8 billion in 2013 revenue.• 4,000 tests including
blood analyses, genetics, and companion diagnostics
• 34,000 employees.• 220,000 customers.
• Physicians, hospitals, governments.
Growing alongside an aging America
First, let’s consider LabCorp’s revenue.•Q2 Sales of $1.52 billion, up 3.3% from last year.
• Total test volume up 5.3%.• Reform: increasing insurance
enrollment.• Demographics: 10,000 boomers
turn 65 daily.• Mix headwind of 2%.• First half 2014 sales up 1.3%.
Growing alongside an aging AmericaShare prices and revenue have grown in tandem over the past 5 years.
5 Keys to Winning in the future
“To be among the winners, we know that LabCorp must excel in five ways:1. Improve the quality and reduce the cost of care.2. Help manage the total cost of care.3. Serve as a performance management partner to our
customers.4. Serve a broad range of customers in multiple settings.5. Build scalable platforms with replicable processes that can
create value at many points along the continuum of care.”
-CEO David King
5 Keys to Winning in the future
1. Improve the quality and reduce the cost of care.• Build scale through
acquisitions.• $60 billion market.• 10% market share.
• Increase its managed care portfolio.
5 Keys to Winning in the future
2. Help manage the total cost of care.• IT infrastructure
investment.• Improve service and
workflow. • Expense reduction.
• Consolidation.
5 Keys to Winning in the future
3. Serve as a performance management partner to our customers.• Optimize operations.• Efficiency initiatives.
• Robotics.
5 Keys to Winning in the future
4. Build scalable platforms with replicable processes that can create value at many points along the continuum of care.
• Develop new tests.• Faster and more accurate.
• BRCA testing.• Personalized medicine.
• Hepatitis C test for Q80K polymorphism.• Required prior to Olysio.
5 Keys to Winning in the future
5. Serve a broad range of customers in multiple settings.
• Beacon LBS: right test at the right cost.
• Enlighten health: physician data and analytic tools.
Impact on earnings
•Gross margin of 37.5%, down from 39.3% last year.
• Product mix•SG&A is 19.6% of sales, up from 19.1%.
• Bad debt reserves, consultants, and merit increases.
•$1.64 EPS versus $1.62 a year ago.•Operating cash flow of $207 million, up from $138 million last year.
Forward guidance
•Guiding revenue growth of ~2.0% this year.•Guiding for adjusted EPS of $6.50 to $6.75 (versus prior guidance of $6.40 to $6.70), excluding share repurchase activity after June 30, 2014.•Guiding for free cash flow of $575 million to $635 million.
Fool-worthy thoughts
•International expansion opportunity in emerging markets.• $160 billion global diagnostics market.
•Opportunity to win U.S. market share.• 5,700 independent labs with a combined 20% market
share.
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