Labcorp (LH) Q2 FY26 earnings call: guidance and Q&A

Can you elaborate on the drivers of strong organic growth, particularly specialty testing, and the underlying utilization trends? Also, what is the anticipated headwind from ACA/Medicaid changes in your guidance?

Diagnostics had strong organic growth of 3.6%, driven by specialty businesses like oncology and neurology growing faster than routine testing. Specialty patients tend to have more tests per accession. The 30 basis point impact from ACA on Diagnostics segment volume for FY26 is maintained in guidance, with Q2 seeing a slight 20-30 basis point headwind. The affected cohort is less than 4-5% of total diagnostic volume.

“The organic growth was 3.6% and then just under 2% was due to acquisitions. If you take a further look, the volume growth was also good at 3%, with the majority of that volume growth coming from organic growth.”

asked by Lisa Gill · answered by Adam Schechter

How should we interpret the organic volume number relative to the market and peers, considering the 'tests per accession' factor? How is Labcorp faring in retail, hospital, and physician office segments?

Volume is accounted for by accession. The 3% volume growth does not include increased tests per accession, which contribute to price/mix. Labcorp is growing substantially more than the typical market growth of 1-2%, driven by hospital and regional lab deals. Strong performance in primary care, hospital segment, and reference testing. Test per accession growth is consistent and slight quarter-over-quarter, supported by structural factors and focus on specialty testing.

“The market typically grows at 1% to 2%. So we're growing substantially more than the overall market. And I think a big part of that is some of the hospital deals that we're doing, the local and regional laboratory deals that we're doing to continue over time to give us additional growth opportunities.”

asked by Kevin Caliendo · answered by Adam Schechter

Regarding BLS, how much of the Early Development revenue improvement is due to restructuring vs. market improvement? Can you decompose the BLS bookings?

BLS revenue increased 6.5%, driven by Central Labs (70% of BLS, grew 10% reported, 8% organic constant currency). Early Development (ED) was down 1% reported but up 3% organic constant currency. ED is seeing study starts more on time, leading to raised guidance to low single-digit growth for FY26. The strong Q2 book-to-bill of 1.14 (1.03 TTM) was primarily driven by Central Labs, boding well for future growth.

“The strength in our book-to-bill was really driven by central laboratories. And if you look at the central laboratories, typically, the book-to-bills for future years. So the strength in our book-to-bill for the quarter of 1.14 or 1.03 trialing 12 months bodes well for the central laboratory business as we look into the future.”

asked by Elizabeth Anderson · answered by Adam Schechter

Labcorp's 3.6% organic growth is strong but lower than a peer. Is this due to competitive factors, market dynamics, or a conscious decision not to pursue lower-margin hospital arrangements?

Labcorp is focusing on high-growth, higher-margin areas like specialty testing (oncology, women's health, autoimmune, neurology) and central laboratory business. The 50 basis point margin improvement in Diagnostics (after lapping Invitae) reflects this strategy. The company is not chasing lower-margin segments, such as some consumer partnerships, due to ample higher-quality growth opportunities.

“What we're doing is we're focusing on high-growth areas like the specialty, oncology, women's health, autoimmune disease neurology. We're focusing on higher margin segments, and in some of the lower margin segments, such as some of the partnerships in the consumer area, we've not focused because we have so many other growth opportunities.”

asked by Jack Meehan · answered by Adam Schechter

Is there increased appetite for hospital lab M&A given ACA noise? What is the visibility on PAMA data submissions and the RESULTS Act?

The M&A pipeline is strong, and hospitals are feeling pressure from ACA and upcoming PAMA. Labcorp maintains a high bar for acquisitions (accretive in year one, return cost of capital in 2-3 years). PAMA data submission deadline is tomorrow (July 31st); insight into total submissions expected in October. The RESULTS Act has bipartisan support and is making progress, but legislative outcomes are uncertain. Labcorp is planning for PAMA implementation next year but also exploring further delays.

“I do think that hospitals are feeling additional pressure not just from ACA, but as they think about it, PAMA is going to occur next year then feel even some additional pressure potentially. So I would say that we have a very high bar. It has to be accretive in the first year, return its cost of capital in 2 to 3 years.”

asked by Tycho Peterson · answered by Adam Schechter