We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Retain Labcorp (LH) Stock for Now
Read MoreHide Full Article
Laboratory Corporation of America Holdings (LH - Free Report) , or Labcorp, is well-poised to grow in the coming quarters, backed by the continued strength of Central Labs, which is driving the success of the biopharma segment. Following the Fortrea spin-off, Labcorp expects to meet customer needs better, drive sustainable and profitable growth and deliver attractive shareholder returns.
However, adverse currency fluctuations and unfavorable solvency remain concerning for the company.
In the past year, this Zacks Rank #3 (Hold) stock has gained 10.6% versus a 14% rise of the industry and a 29.5% increase of the S&P 500 composite.
The renowned healthcare diagnostics company has a market capitalization of $18.19 billion. In the last reported quarter, the company delivered an average earnings surprise of 0.30%.
Let’s delve deeper.
Factors at Play
Biopharma Laboratory Service Expansion Continues: This business is benefiting from collaborations with leading pharmaceutical and biotechnology companies with whom it started to work on potential antivirals, treatments and vaccines.
In 2023, Labcorp opened two new international facilities in China — a new kit production facility and an expanded immunology and immunotoxicology laboratory. The operations underpin plans to enhance patient outcomes across the Asia-Pacific (APAC) region and broaden the drug development pipeline. The company had earlier enhanced its central laboratory presence and drug development capabilities in Japan through an expansion of CB Trial Laboratory — co-managed by renowned Japan-based clinical laboratory testing services provider BML.
Spin-off of the CDSS Business to Add More Value: In 2023, Labcorp completed the planned spin-off of its CDCS business. As an independent, publicly-held company, Fortrea provides Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations.
Image Source: Zacks Investment Research
Following the spin-off, Labcorp and Fortrea expect to have a strong strategic flexibility and an operational focus to pursue specific market opportunities and better meet customer needs, focused capital structures and capital allocation strategies to drive innovation and growth.
Strategic Partnerships to Drive Growth: Labcorp boasts a robust pipeline of potential hospital and local laboratory acquisitions, which presents ample opportunities for its growth. The company also continues to progress in terms of integrating hospital partnerships and acquisitions.
In the fourth quarter of 2023, the momentum from the health systems and regional local lab partnership strategy remained strong. Labcorp announced a strategic partnership with Baystate Health in Western Massachusetts to acquire its outreach laboratory business and select operating assets. It also completed the acquisition of select assets from Legacy Health and currently manages Legacy's inpatient hospital laboratories, serving patients throughout Oregon and Southwest Washington.
Downsides
Debt Profile: At the end of the fourth quarter of 2023, Labcorp had short-term borrowings and the current portion of the long-term debt of $999.8 million, while cash and cash equivalents stood at $536.8 million. This raises our concern about the company’s ability to meet its immediate debt obligations.
Exposed to Currency Headwind: With Labcorp deriving a considerable share of its revenues internationally, it remains highly exposed to currency fluctuations. With the recent upward trend observed in the value of the U.S. dollar, further acceleration expected by analysts in this value will cause the company’s revenues to face a challenging situation overseas.
Estimate Trend
The Zacks Consensus Estimate for LH’s fiscal 2024 earnings per share (EPS) has moved up from $14.59 to $14.83 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $12.79 billion, suggesting a decline of 0.89% from the year-ago reported figure.
Key Picks
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Cencora, Inc. (COR - Free Report) and Cardinal Health (CAH - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Here's Why Investors Should Retain Labcorp (LH) Stock for Now
Laboratory Corporation of America Holdings (LH - Free Report) , or Labcorp, is well-poised to grow in the coming quarters, backed by the continued strength of Central Labs, which is driving the success of the biopharma segment. Following the Fortrea spin-off, Labcorp expects to meet customer needs better, drive sustainable and profitable growth and deliver attractive shareholder returns.
However, adverse currency fluctuations and unfavorable solvency remain concerning for the company.
In the past year, this Zacks Rank #3 (Hold) stock has gained 10.6% versus a 14% rise of the industry and a 29.5% increase of the S&P 500 composite.
The renowned healthcare diagnostics company has a market capitalization of $18.19 billion. In the last reported quarter, the company delivered an average earnings surprise of 0.30%.
Let’s delve deeper.
Factors at Play
Biopharma Laboratory Service Expansion Continues: This business is benefiting from collaborations with leading pharmaceutical and biotechnology companies with whom it started to work on potential antivirals, treatments and vaccines.
In 2023, Labcorp opened two new international facilities in China — a new kit production facility and an expanded immunology and immunotoxicology laboratory. The operations underpin plans to enhance patient outcomes across the Asia-Pacific (APAC) region and broaden the drug development pipeline. The company had earlier enhanced its central laboratory presence and drug development capabilities in Japan through an expansion of CB Trial Laboratory — co-managed by renowned Japan-based clinical laboratory testing services provider BML.
Spin-off of the CDSS Business to Add More Value: In 2023, Labcorp completed the planned spin-off of its CDCS business. As an independent, publicly-held company, Fortrea provides Phase I-IV clinical trial management, market access and technology solutions to pharmaceutical and biotechnology organizations.
Following the spin-off, Labcorp and Fortrea expect to have a strong strategic flexibility and an operational focus to pursue specific market opportunities and better meet customer needs, focused capital structures and capital allocation strategies to drive innovation and growth.
Strategic Partnerships to Drive Growth: Labcorp boasts a robust pipeline of potential hospital and local laboratory acquisitions, which presents ample opportunities for its growth. The company also continues to progress in terms of integrating hospital partnerships and acquisitions.
In the fourth quarter of 2023, the momentum from the health systems and regional local lab partnership strategy remained strong. Labcorp announced a strategic partnership with Baystate Health in Western Massachusetts to acquire its outreach laboratory business and select operating assets. It also completed the acquisition of select assets from Legacy Health and currently manages Legacy's inpatient hospital laboratories, serving patients throughout Oregon and Southwest Washington.
Downsides
Debt Profile: At the end of the fourth quarter of 2023, Labcorp had short-term borrowings and the current portion of the long-term debt of $999.8 million, while cash and cash equivalents stood at $536.8 million. This raises our concern about the company’s ability to meet its immediate debt obligations.
Exposed to Currency Headwind: With Labcorp deriving a considerable share of its revenues internationally, it remains highly exposed to currency fluctuations. With the recent upward trend observed in the value of the U.S. dollar, further acceleration expected by analysts in this value will cause the company’s revenues to face a challenging situation overseas.
Estimate Trend
The Zacks Consensus Estimate for LH’s fiscal 2024 earnings per share (EPS) has moved up from $14.59 to $14.83 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $12.79 billion, suggesting a decline of 0.89% from the year-ago reported figure.
Key Picks
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Cencora, Inc. (COR - Free Report) and Cardinal Health (CAH - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.