Healthcare diagnostics company Labcorp Holdings (NYSE: LH) met Wall Street’s revenue expectations in Q2 CY2026, with sales up 5.8% year on year to $3.73 billion. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $14.77 billion at the midpoint. Its non-GAAP profit of $4.99 per share was 4.6% above analysts’ consensus estimates.

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"Labcorp delivered another very strong quarter, with 6% revenue growth, significant margin expansion, and double-digit adjusted EPS growth reflecting continued momentum across the business," 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

Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Labcorp’s demand was weak and its revenue declined by 2.6% per year. This was below our standards 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 grew its revenue by 5.8% year on year, and its $3.73 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.2% over the next 12 months, a slight deceleration versus the last two years. We still think its growth trajectory is satisfactory given its scale and suggests the market is forecasting success for its products and services.

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Adjusted Operating Margin

Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.

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%.

Looking at the trend in its profitability, Labcorp’s adjusted operating margin decreased by 7.1 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.

This quarter, Labcorp generated an adjusted operating margin profit margin of 15.8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth — for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Labcorp, its EPS declined by 12.4% 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 was flat this quarter but declined by 7.1 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 Q2, Labcorp reported adjusted EPS of $4.99, up from $4.35 in the same quarter last year. This print beat analysts’ estimates by 4.6%. Over the next 12 months, Wall Street expects Labcorp’s full-year EPS to grow 6.8% from $17.49 to $18.68.

Key Takeaways from Labcorp’s Q2 Results

It was encouraging to see Labcorp beat analysts’ full-year EPS guidance expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Overall, this print had some positives. The market seemed to be hoping for more, and the stock traded down 4.7% to $292.77 immediately following the results.

Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).