Healthcare diagnostics company Labcorp Holdings (NYSE: LH) announced better-than-expected revenue in Q1 CY2026, with sales up 5.8% year on year to $3.54 billion. The company expects the full year’s revenue to be around $14.73 billion, close to analysts’ estimates. Its non-GAAP profit of $4.25 per share was 3.3% above analysts’ consensus estimates.

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"Labcorp delivered another quarter of strong results, with robust growth and double-digit Adjusted EPS growth driven by continued momentum across our Diagnostics and Central Laboratory businesses," said Adam Schechter, Chairman and CEO of Labcorp.

Company Overview

With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE: LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Labcorp’s demand was weak over the last five years as its sales fell at a 1.6% annual rate. This wasn’t a great result and is a sign of lacking business quality.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Labcorp’s annualized revenue growth of 7.2% over the last two years is above its five-year trend, which is encouraging.

Labcorp also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Labcorp’s organic revenue averaged 4.3% year-on-year growth. Because this number is lower than its two-year revenue growth, we can see that some mixture of acquisitions and foreign exchange rates boosted its headline results.

This quarter, Labcorp reported year-on-year revenue growth of 5.8%, and its $3.54 billion of revenue exceeded Wall Street’s estimates by 0.9%.

Looking ahead, sell-side analysts expect revenue to grow 5% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges.

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Adjusted Operating Margin

Labcorp has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average adjusted operating margin of 16.2%.

Looking at the trend in its profitability, Labcorp’s adjusted operating margin decreased by 8.6 percentage points over the last five years. Even though its historical margin was healthy, shareholders will want to see Labcorp become more profitable in the future.

In Q1, Labcorp generated an adjusted operating margin profit margin of 11.7%, down 2.4 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Labcorp, its EPS declined by 11.1% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

Diving into the nuances of Labcorp’s earnings can give us a better understanding of its performance. As we mentioned earlier, Labcorp’s adjusted operating margin declined by 8.6 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Labcorp reported adjusted EPS of $4.25, up from $3.84 in the same quarter last year. This print beat analysts’ estimates by 3.3%. Over the next 12 months, Wall Street expects Labcorp’s full-year EPS of $16.85 to grow 8.3%.

Key Takeaways from Labcorp’s Q1 Results

It was good to see Labcorp narrowly top analysts’ full-year EPS guidance expectations this quarter. Full-year revenue guidance was also raised. We were also happy its revenue and EPS outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 5.5% to $271.20 immediately after reporting.

So do we think Labcorp is an attractive buy at the current price? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).