The earnings correction that most expected to start at the end of 2021 has finally begun in the first quarter of 2022, with most diagnostics companies experiencing modest, flat, or negative top-line revenue growth rates. The basic narrative: COVID-19 revenues are falling faster than core testing revenues are recovering. Here’s a briefing on the 2022 Q1 big picture.

Revenues Creep Back to Post-COVID Reality

Pandemic and unprecedented demand for COVID-19 tests, platforms, supplies, and services drove spectacular growth in Q1 2021, establishing revenue baselines that would be almost impossible to match in 2022. Sure enough, 11 of the 40 companies that had reported their earnings when we went to press posted negative or flat (i.e., 1% or less) top-line revenue growth in Q1 2022. Decliners included testing giants Quest Diagnostics (-4%), LabCorp (-6%), PerkinElmer (-4%), and Hologic (-7%).

On the positive side, the glass was nearly ¾ full, with 29 of 40 companies reporting top-line growth. But at least on a sequential basis, the trajectory is down, with a number of companies experiencing significantly lower rates of growth, as compared to the previous quarter.

2022 Q1 Sequential Revenue Growth

The other silver lining is that the slowdown was far less than Wall Street was expecting. Discounting European firms Siemens Healthineers, DiaSorin, and Roche, only six companies missed their top-line earnings targets during Q1. However, two of those missers were Quest and LabCorp. By contrast, the other billion-dollar companies met or exceeded and, in some cases, crushed their Wall Street targets:

2022 Q1 Actual vs Wall Street Expected Revenues (in Billions)

Other companies that missed their Wall Street earnings targets include Invitae, NanoString Technologies, Opko Health, and Ortho Clinical Diagnostics.

The Outlook

Even though COVID-19 products and testing fell off significantly in Q1, they continued to generate positive revenues, lifting Hologic, Qiagen, Abbott, Thermo Fisher Scientific, Roch,e and others to better than expected earnings. But the surge is pronouncedly weaker and won’t likely last much longer. Demand for COVID-19 testing will decline for the rest of the year, companies are warning.

Even so, growth is expected to continue as core businesses recover. Thus, no fewer than 16 of the 40 reported companies raised their full year guidance for 2022, including Quest, Agilent Technologies, Becton Dickinson, Hologic, Siemens Healthineers, and Thermo Fisher Scientific.

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Diagnostics Earning Reports for 2022 Q1 (period ended March 31, 2022) (Companies with at least $20 million in sales)

Bold face: Companies that met or exceeded average or consensus Q1 Wall Street revenue estimates

* Companies that raised their revenue or EPS guidance during Q1

** Companies that lowered their revenue or EPS guidance during Q1