Market Reacts to This Low-Beta Holding's Earnings

Alright gang, one of the Portfolio’s lower-beta holdings, Labcorp (LH) , reported quarterly results on Tuesday morning, which initially led the shares to trade higher in pre-market trading, only to more than give that back as Tuesday's trading began.

So, what did Labcorp deliver? December quarter EPS of $4.07, $0.13 ahead of the market forecast on revenue that climbed 5.6% year over year to $3.52 billion. The market was expecting revenue of $3.56 billon. In terms of forward guidance, Labcorp pegged 2026 EPS between $17.55 and $18.25, which was ahead of the $17.51 consensus.

Leafing through the earnings press release, we find December quarter revenue was a combination of organic growth (4.1%) and acquisition-led growth (1.5%), which is part and parcel of Labcorp’s strategy. In addition to completing previously announced acquisitions of select assets from Community Health Systems and Incyte Diagnostics, Labcorp agreed to acquire select lab services from Parkview Health. Labcorp also continued to expand its array of diagnostic testing:

Launched the first FDA-cleared blood test for Alzheimer's disease assessment in primary care settings
Expanded access to its molecular residual disease (MRD) testing for stage I–III breast cancer, stage I–IIIA non-small cell lung cancer and stage III colon cancer
Launched several new consumer-initiated tests through Labcorp OnDemand, including tests for food allergies, micronutrients and thyroid health.

All in all, the company continues to execute on its stated two-pronged revenue strategy.

For the full-year, Labcorp delivered free cash flow of $1.21 billion, up from $1.10 billion in 2024, and largely in line with its October guidance of $1.17 billion to $1.29 billion. One of the factors weighing on LH shares is that the company did not generate as much free cash flow in the December quarter as it did last year. By the numbers, in Q4 2025, free cash flow came in at $490.3 million, down from $665.1 million in Q4 2024 but up from $280.5 million in Q3 2025.

What was the likely culprit? Some of it can be traced to Labcorp’s acquisition activity, but another factor was the stepped-up share repurchase activity. In Q3 2025, Labcorp repurchased about $25 million in stock, but in Q4 2025, that figure jumped to $255 million. That was multiples higher compared to the $75.1 million repurchased in Q4 2024, and that $180 million difference explains the drop in free cash flow levels year over year.

Looking at the chart above, odds are Labcorp supported the stock after reporting its Q3 2025 earnings on October 28. We would not be surprised to learn it did more of the same in late December. For the coming year, Labcorp sees its free cash flow rising about 8% to $1.3 billion. That should provide ample ammo for further nip and tuck acquisitions, and, subject to where the shares are trading, more stock repurchases.

In terms of key metrics to track for Labcorp, trailing 12-month orders exiting 2025 stood at 3.37 billion, and its book-to-bill closed the quarter at 1.09. In-line with its Q3 2025 metrics, but well ahead of those for the year-ago quarter. Exiting 2025, Labcorp’s backlog stood at $8.58 billion, up more than 5% year over year. That provides ample runway for the company, while it continues to make strides in integrating acquired businesses, driving its margins higher. For 2025, its operating margin rose 50 basis points to 14.3%, up from 13.8% in 2024, and was higher compared to 2023 as well.

More than likely, we are seeing yet another knee-jerk reaction when it comes to Labcorp shares, but as we’ve said many times before, let’s get through the company’s earnings conference call first before making any final decisions or moves.

More Pro Portfolio

At the time of publication, TheStreet Pro Portfolio was long LH.