Baird Analyst Presses Labcorp On BioReference Math: $216 Million In Revenue, About $0.15 Of EPS
A Baird analyst said he could not reproduce year-one accretion from the BioReference deal, and CEO Adam Schechter answered with history, not numbers.
A Baird analyst told Labcorp management on its third-quarter earnings call Wednesday that he struggled to reproduce the year-one gain from the BioReference deal, which CFO Julia Wang put at about $0.15 of adjusted earnings per share. Chairman and CEO Adam Schechter answered mostly by pointing to the company's two earlier deals with BioReference.
The math the analyst could not make work
Wang said Labcorp expects the BioReference assets to produce $216 million of revenue in the first 12 months, at an adjusted operating margin slightly above the diagnostics segment average. She said that works out to about $0.15 of adjusted EPS including financing costs, and that Labcorp expects a mid-year 2027 close, subject to regulatory approvals.
The Baird analyst said he likes the deals but had been worried about this one, since first-year quarters usually run well below the post-synergy exit rate. He asked whether a tax benefit drove the 15 cents. By his scratch-pad math, the guidance implied a year-one operating margin of something like 22% or 23%, which he called "a lot better than I expected."
Familiarity as the answer
Schechter said Labcorp has done two deals with BioReference, understands its systems and cost structure, and knows what that cost structure would look like in Labcorp's hands. He said the revenue estimate includes the effect of PAMA, the Medicare lab-fee law, plus other adjustments to what BioReference might have reported before.
Pressed on synergies, the analyst said BioReference has something like 80 service centers, a figure from his own recollection. Schechter said where locations overlap, Labcorp will pick the best one to keep, which could mean closing some of its own. He added that expansion planned near its Raritan laboratory, which is close to BioReference's lab, might shrink.
Wang said the earlier integrations succeeded and delivered on return expectations.
Three deals, one lab giant
Labcorp runs laboratories that test patient samples and support drug development. Its diagnostics segment generated $10,876.5 million of its $13,951.7 million in 2025 revenue.
After the quarter ended, it signed three acquisition agreements. Besides BioReference, it agreed to buy Myriad Genetics' prenatal testing business, which Wang said should add about $160 million in revenue and be slightly accretive in year one, with an early 2027 close. It also agreed to buy Millennium Health, expected to close later this year.
Each deal is expected to add to adjusted EPS in year one and return the cost of capital by year three. Schechter said the pipeline remains strong and more announcements are coming.
Quarter and PAMA backdrop
Labcorp reported third-quarter revenue up 7% to $3.8 billion and adjusted EPS up 14.5% to $4.78. It raised the midpoint of 2026 guidance, with adjusted EPS now $18.30 to $18.70.
Wang estimated the 2027 PAMA hit at about $125 million, based on the preliminary fee schedule from CMS, the Medicare agency. Labcorp plans to offset part of it and will give 2027 guidance in February.
Labcorp will give its 2027 guidance in February, with Myriad expected to close in early 2027 and BioReference by mid-2027.
Sources
- Labcorp Holdings (LH) Q3 Earnings and Revenues Surpass Estimates — Yahoo Finance
- Compared to Estimates, Labcorp (LH) Q3 Earnings: A Look at Key Metrics — Yahoo Finance
- Waters & Labcorp Expand Access to FDA-Approved HPV Screening Tests — Yahoo Finance
- Labcorp Reports Strong 2026 Third Quarter Results; Raises Full Year 2026 Guidance — prnewswire.com
