COVID-19 Losses Take a Toll on Q4 Earnings—but It Could Have Been Worse
Though Q4 earnings in the lab industry took a beating as predicted, the earnings picture wasn’t nearly as bleak as many had feared.

As expected, lab company earnings took a beating in the fourth quarter of 2022 as COVID-19 product and service revenues continued to tumble in comparison to their Q1 2021 year-over-year (YOY) baselines. That trend is expected to continue in 2023, with Quest, Abbott, Labcorp, and other major lab companies projecting declines of 80 percent or more in global COVID-19 diagnostics sales. However, the earnings picture wasn’t anywhere as bleak as many had feared. There’s also grounds for optimism going forward. Here’s a briefing on the overall earnings picture for Q4 and beyond.
Post-COVID Realities Drag Down Lab Earnings
Of the 23 major lab companies that had reported their earnings for the period October 1 to December 31, 2022, at the time we went to press, all but 10 saw their YOY revenues decline. The following figures provide some perspective on the year-long earnings decline trajectory:
Overall YOY Revenue Growth, 2021 vs 2022
Company | Q4 2022 | Q3 2022 | Q2 2022 | Q1 2022 |
Abbott | -12% | -6% | +10% | +14% |
Becton Dickinson | -2% | -2% | +0.7% | +2% |
Danaher | +6% | +6% | +8% | +12% |
Illumina | -10% | +1% | +2.7% | +12% |
Labcorp | -10% | -11% | -3.7% | -6% |
PerkinElmer | -28% | -17% | 0% | -4% |
Qiagen | -14% | -7% | -9% | +11% |
Quest | -15% | -10% | -4% | -4% |
Of course, the losses aren’t all due to COVID. The industry is also confronting other significant macro economic headwinds, including record inflation. While it was widely recognized that the enormous COVID profits of FY 2020 and 2021 would be unsustainable, the expectation was that patients would eventually resume the medical care they delayed during the pandemic, driving a strong rebound in core testing that would at least partially offset the COVID losses.
But, so far, the big rebound in core lab testing hasn’t happened. One explanation for this is that rising copays, deductibles, and other costs are keeping patients home. Thus, in a January 2023 Gallup poll, 38 percent of Americans said that they had put off their medical needs due to costs in 2022, up 12 percent from 2021.1
Times are especially challenging for US companies that sell diagnostic products abroad. Markets are weak all around the world, especially in the crucial China market where COVID lockdowns have been the order of the day. Meanwhile, foreign exchange rates and the strong US dollar are exerting an enormous drag on sales, earnings, and profits.
It Could Be Worse
Cushioning the blow is that the decline in revenues has been accompanied by a decline in expectations. We all knew the COVID bubble would burst—partly because the big testing companies like Abbott, Quest, and Labcorp have been sounding the warning for months. As a result, the Q3 and Q4 earnings losses have caught few investors by surprise. Even better is that, so far at least, the losses haven’t been as big as projected. Thus, 75 percent of the reporting companies actually met or exceeded their top line Wall Street targets for Q4, in many cases by comfortable margins. Most of these companies also met their full year FY 2022 revenues targets.
Notable Lab Companies that Hit Their 2022 Q4 Wall Street Revenues Targets
Company | Actual Revenues | Target Revenues |
Thermo Fisher Scientific* | $11.45 billion | $10.43 billion |
Abbot* | $10.09 billion | $9.67 billion |
Danaher* | $8.37 billion | $7.90 billion |
Becton Dickinson | $4.59 billion | $4.52 billion |
Quest Diagnostics | $2.33 billion | $2.26 billion |
Illumina* | $1.08 billion | $1.07 billion |
Hologic | $1.07 billion | $1.00 billion |
QuidelOrtho* | $866.5 million | $779.6 million |
Waters* | $858.5 million | $833.2 million |
Bruker* | $708.4 million | $680.1 million |
Exact Sciences* | $553.0 million | $528.2 million |
Qiagen | $582.4 million | $486.9 million |
However, Labcorp was among the companies that came in short of their Q4 earnings targets, along with Bio-Rad Laboratories, Bio-Techne, PerkinElmer, and Twist Bioscience.
A Pathway for Growth in FY 2023
Several companies suggested that they’re prepared for the continued COVID losses in the coming year. Although the rebound hasn’t been as dramatic as expected, non-COVID revenues are slowly creeping above pre-pandemic levels. Companies like Quest and Labcorp will likely turn to acquisitions to boost their revenues. Others are in a position to parlay their investment in COVID testing into strategic opportunity.
Rapid, point-of-care testing appears to be an especially promising pathway to growth. One of the key players will be Abbott, which in delivering nearly 3 billion COVID-19 tests since the pandemic began, established a base in installed instruments, including the point-of-care ID NOW platform, which can be expanded to testing for other respiratory illnesses like influenza. In addition to an instrument base, many companies have also been able to use COVID testing during the pandemic to gain a toehold in new testing channels, such as physicians’ offices and at-home testing.
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Diagnostics Earning Reports for 2022 Q4 (period ended December 31, 2022) (Companies with at least $30 million in sales)
Bold face: Companies that met or exceeded average or consensus Q4 Wall Street revenue estimates
* Companies that raised their revenue or EPS guidance during Q4
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