Shares of Labcorp Holdings Inc (LH) plummeted 5.68% in pre-market trading on Tuesday following the release of its third-quarter earnings report. Despite beating analyst expectations, the company's updated guidance for its early-stage drug development business appears to have disappointed investors.

Labcorp reported adjusted earnings per share of $4.18 for the third quarter, surpassing the FactSet consensus estimate of $4.13. Revenue for the quarter came in at $3.56 billion, in line with analyst expectations. The company's performance showed improvement from the previous year, with adjusted EPS up from $3.50 and revenue increasing from $3.28 billion in Q3 2024.

However, the stock's sharp decline seems to be driven by the company's forward-looking statements. During the earnings call, a Labcorp executive revealed that they now expect the early-stage drug development business to grow in the low-single digits in 2025, down from the previously expected mid-single digit growth. This downward revision in growth expectations for a key business segment likely triggered the negative market reaction. Additionally, while Labcorp raised the lower end of its full-year adjusted EPS guidance to a range of $16.15 to $16.50, this update may not have been sufficient to offset concerns about slowing growth in the drug development sector.