It was only a matter of time. Sooner or later, the combination of falling demand for COVID-19 tests and adverse macroeconomic conditions were bound to take their toll on lab companies’ earnings. While the first two quarters of 2022 represented a come down from the soaring revenues of 2021, it took until Q3 for reality to set in. It was a tough quarter for most companies, even though core non-COVID-19 revenues continued their gradual recovery. Here’s an overview of Q3 2022 and the key trends in lab industry earnings.

“Probably Our Most Challenging” Quarter

That’s how Abbott Laboratories CEO Robert Ford described the three-month period from July 1 to September 30, 2022, on the company’s earnings call with investors. And it wasn’t just Abbott. Q3 was challenging for just about all the major US lab companies, with year-over-year (YOY) revenues also down or flat at 12 of the 31 companies that had reported earnings as of press time, including major firms like Becton Dickinson, Hologic, Illumina, Labcorp, PerkinElmer, Qiagen, and Quest Diagnostics.

One big reason for the YOY declines is the comparison with Q3 2021 when COVID-19 products, while past their peak, were still driving strong growth at most major testing companies.

Overall YOY Revenue Growth, Q3 2021 vs Q3 2022

Company	Q3 2021	Q3 2022
Abbott	+24%	-6%
Becton Dickinson	+7%	-2%
Danaher	+23%	+6%
DiaSorin	+51%	-5%
Illumina	+40%	+1%
Labcorp	+4%	-11%
PerkinElmer	+21%	-17%
Qiagen	+11%	-7%
Quest	Flat	-10%

There were other major headwinds during the quarter, including:

• The strong US dollar, which made it harder to sell products and services abroad and forced several companies to lower their revenue forecasts for the remainder of the year;
• Rising inflation, which reduced the pace of recovery of core testing and depressed bottom line earnings per share (EPS) totals;
• Supply chain bottlenecks, particularly microchips, that slowed instrument and platform sales at companies like Abbott, Bio-Techne, DiaSorin, and Hologic; and
• Ongoing COVID-19 lockdowns that affected companies like Bio-Techne, Danaher, DiaSorin, Illumina, and 10x Genomics.

These macroeconomic factors forced several companies to restructure their operations and lay off workers.

Top Line Earnings

One bit of good news is that the slowdown in earnings caught few by surprise. Thus, of the 30 surveyed companies, all but six met or exceeded their top line Wall Street targets. That includes six companies where revenues were down or flat—Abbott, Becton Dickinson, Ginkgo Bioworks, Hologic, Illumina, and PerkinElmer.

Eight of the companies that missed their targets in Q2 turned it around in Q3. Among the companies that came in short in Q3, all but three—Adaptive Biotech, Labcorp, and PacBio—came in above expectations on the bottom line.

2022 Q3 Companies that Missed Their Wall Street Revenues Targets

Company	Actual Revenues	Target Revenues
Adaptive Biotech	$47.8 million	$48.0 million
Bio-Techne	$269.7 million	$281.7 million
CareDx	$79.4 million	$82.6 million
Labcorp	$3.61 billion	$3.79 billion
Myriad Genetics	$156.4 million	$170.1 million
PacBio	$32.3 million	$35.4 million

Prospects for the Rest of the Year and 2023

What does this latest earnings report portend for future revenues? The universal consensus is that COVID-19 revenues will continue to drop. The big question is whether core revenues will rebound fast enough to offset the losses.

Of the 12 companies that revised their revenue or EPS forecasts for the remainder of calendar year 2022, only three projected lower revenues. However, those three are major players with a disproportionate impact on Wall Street, including Labcorp, Siemens Healthineers, and Illumina, which gave its future revenues forecast a haircut for the second quarter in a row.

But there were also some heavy hitters among the nine companies that raised their revenue projections, including lab giants Abbott, Quest Diagnostics, and Thermo Fisher Scientific, as well as genetic test makers Exact Sciences and Qiagen.

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Diagnostics Earning Reports for 2022 Q3 (period ended September 30, 2022)

 (Companies with at least $30 million in sales)

Bold face: Companies that met or exceeded average or consensus Q3 Wall Street revenue estimates

* Companies that raised their revenue or EPS guidance during Q3

** Companies that lowered their revenue or EPS guidance during Q3