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Here's Why You Should Retain LabCorp (LH) Stock for Now
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Laboratory Corporation of America Holdings or LabCorp (LH - Free Report) is gaining from an ongoing rebound in the base business across both operating segments. The company ended the first quarter of 2022 with earnings beating the Zacks Consensus Estimate. A strong solvency position is an added upside. However, declining sales and foreign exchange headwinds are a concern.
In the past year, the Zacks Rank #3 (Hold) stock lost 11.5% against a 6% fall of the industry and a 4.6% drop of the S&P 500.
The renowned healthcare diagnostics company has a market capitalization of $22.68 billion. Its earnings for first-quarter 2022 surpassed the Zacks Consensus Estimate by 3.9%.
In the past five years, the company’s earnings rallied 26.1% compared with the industry’s 13.3% rise and the S&P 500’s 13.4% increase. The company’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 17.6% on average.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q1 Upsides: LabCorp recorded better-than-expected earnings in the first quarter. The company saw a continued recovery in the base business across the Diagnostics and Covance Drug Development segments. The significant revenue contributions from the company’s acquired businesses instill optimism. The launch of the Labcorp OnDemand digital health platform in February 2022 seems strategic.
LabCorp exited the first quarter with a backlog of $15.2 billion. The company anticipates $4.9 billion of this backlog to convert into revenues over the next 12 months.
Covance Drug Development Growth Continues: We are upbeat about LabCorp’s Drug Development business, which delivered revenue growth of 1.5% year over year in the first quarter. The upside was driven by organic base business growth of 4.3% and a 0.1% growth of acquisitions net of divestitures. In terms of new acquisitions, we may note LabCorp’s acquisition of Toxikon Corporation, which was completed in December 2021.
The Drug Development business ended first-quarter 2022 with a trailing 12-month net book-to-bill of 1.23.
Solvency Position: LabCorp exited the first quarter of 2022 with cash and cash equivalents of $1.23 billion compared with $1.47 billion at the end of 2021. While the quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the current-year payable debt plus short-term borrowings is $1.6 million—lower than the short-term cash level. This is a positive factor in terms of the company’s solvency level as during the time of economic uncertainties, the company has sufficient cash for short-term debt repayment.
Downsides
Dull Sales Scenario: LabCorp’s revenues for the first quarter lagged the Zacks Consensus Estimate and declined year over year. The company witnessed a continued decline in COVID-19 Testing sales in the reported quarter, raising apprehension.
Forex Woes: With LabCorp deriving a vast share of its revenues internationally, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a significant dampener over the last few quarters, as is the case with other important MedTech players.
Competitive Landscape: LabCorp faces intense competition from notable MedTech biggies and other commercial laboratories and hospitals. In a $55-billion U.S. lab market, hospitals control an estimated 55% of the diagnostic test market compared with LabCorp’s 10% share.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for LabCorp’s 2022 earnings has moved north by 5.4% to $19.90.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $15.41 billion, suggesting a 4.4% decline from the 2021 comparable figure.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has declined 4.1% versus the industry’s 64.1% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).
Medpace has outperformed its industry in the past year. MEDP has declined 19.1% against the industry’s 64.1% fall.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 16.8% compared with 14.5% industry growth in the said period.
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Here's Why You Should Retain LabCorp (LH) Stock for Now
Laboratory Corporation of America Holdings or LabCorp (LH - Free Report) is gaining from an ongoing rebound in the base business across both operating segments. The company ended the first quarter of 2022 with earnings beating the Zacks Consensus Estimate. A strong solvency position is an added upside. However, declining sales and foreign exchange headwinds are a concern.
In the past year, the Zacks Rank #3 (Hold) stock lost 11.5% against a 6% fall of the industry and a 4.6% drop of the S&P 500.
The renowned healthcare diagnostics company has a market capitalization of $22.68 billion. Its earnings for first-quarter 2022 surpassed the Zacks Consensus Estimate by 3.9%.
In the past five years, the company’s earnings rallied 26.1% compared with the industry’s 13.3% rise and the S&P 500’s 13.4% increase. The company’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 17.6% on average.
Image Source: Zacks Investment Research
Let’s delve deeper.
Factors At Play
Q1 Upsides: LabCorp recorded better-than-expected earnings in the first quarter. The company saw a continued recovery in the base business across the Diagnostics and Covance Drug Development segments. The significant revenue contributions from the company’s acquired businesses instill optimism. The launch of the Labcorp OnDemand digital health platform in February 2022 seems strategic.
LabCorp exited the first quarter with a backlog of $15.2 billion. The company anticipates $4.9 billion of this backlog to convert into revenues over the next 12 months.
Covance Drug Development Growth Continues: We are upbeat about LabCorp’s Drug Development business, which delivered revenue growth of 1.5% year over year in the first quarter. The upside was driven by organic base business growth of 4.3% and a 0.1% growth of acquisitions net of divestitures. In terms of new acquisitions, we may note LabCorp’s acquisition of Toxikon Corporation, which was completed in December 2021.
The Drug Development business ended first-quarter 2022 with a trailing 12-month net book-to-bill of 1.23.
Solvency Position: LabCorp exited the first quarter of 2022 with cash and cash equivalents of $1.23 billion compared with $1.47 billion at the end of 2021. While the quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the current-year payable debt plus short-term borrowings is $1.6 million—lower than the short-term cash level. This is a positive factor in terms of the company’s solvency level as during the time of economic uncertainties, the company has sufficient cash for short-term debt repayment.
Downsides
Dull Sales Scenario: LabCorp’s revenues for the first quarter lagged the Zacks Consensus Estimate and declined year over year. The company witnessed a continued decline in COVID-19 Testing sales in the reported quarter, raising apprehension.
Forex Woes: With LabCorp deriving a vast share of its revenues internationally, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a significant dampener over the last few quarters, as is the case with other important MedTech players.
Competitive Landscape: LabCorp faces intense competition from notable MedTech biggies and other commercial laboratories and hospitals. In a $55-billion U.S. lab market, hospitals control an estimated 55% of the diagnostic test market compared with LabCorp’s 10% share.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for LabCorp’s 2022 earnings has moved north by 5.4% to $19.90.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $15.41 billion, suggesting a 4.4% decline from the 2021 comparable figure.
Key Picks
A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Medpace Holdings, Inc. (MEDP - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 1.1%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.6%, on average. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has outperformed its industry in the past year. AMN has declined 4.1% versus the industry’s 64.1% fall.
Medpace has a historical growth rate of 27.3%. Medpace’s earnings surpassed estimates in the trailing four quarters, the average surprise being 17.1%. It currently has a Zacks Rank #2 (Buy).
Medpace has outperformed its industry in the past year. MEDP has declined 19.1% against the industry’s 64.1% fall.
UnitedHealth has an estimated long-term growth rate of 14.8%. UnitedHealth’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%. It currently carries a Zacks Rank #2.
UnitedHealth has outperformed the industry over the past year. UNH has gained 16.8% compared with 14.5% industry growth in the said period.