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Here's Why Investors Should Retain LabCorp (LH) Stock for Now
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Laboratory Corporation of America Holdings, or LabCorp (LH - Free Report) , is gaining from the strength in its Drug Development business. The company’s continued efforts to identify and expand in high-growth opportunity areas instils optimism. However, stiff competition and foreign exchange headwinds do not bode well.
In the past year, the Zacks Rank #3 (Hold) stock has lost 18.3% compared with a 9.7% plunge of the industry and 18.1% fall of S&P 500.
The renowned healthcare diagnostics company has a market capitalization of $20.89 billion. The company’s earnings surpassed estimates in the trailing three quarters and missed in one, delivering a surprise of 6.06% on average.
Let’s delve deeper.
Factors At Play
Covance Drug Development Growth Continues: LabCorp is benefiting from collaborations with leading pharmaceutical and biotechnology companies with whom it started to work on potential antivirals, treatments and vaccines.
In 2022, the company enhanced its central laboratory presence and drug development capabilities in Japan by expanding CB Trial Laboratory. This central laboratory is co-managed by LabCorp Drug Development and a renowned Japan-based clinical laboratory testing services provider, BML. Under the collaboration, LabCorp and BML will start working on a new laboratory facility in Kawagoe, Saitama, extending capacity and services for pharmaceutical and biotechnology clients.
Targeted Development in High-Growth Area: In its efforts to identify and expand in high-growth opportunity areas, LabCorp launched the Neurofilament Light Chain (NfL) blood test to facilitate the detection and verification of the signs of neurodegenerative disease. This widely accessible test provides direct evidence of neurodegeneration and neuronal injury. It aids in diagnosing neuronal injury resulting from brain injury, such as a concussion or from diseases like multiple sclerosis, Alzheimer’s and Parkinson’s.
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In May 2022, the company announced the launch of an at-home collection kit for diabetes screening, which measures hemoglobin A1c (HbA1c) from a small blood sample. With the introduction of the kit, consumers can access the diabetes risk test kit and other health and wellness tests through “Labcorp OnDemand.”
Downsides
Exposed to Currency Headwind: With LabCorp deriving a huge share of its revenues internationally, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener over the last few quarters, as in the case of other important MedTech players too.
Competitive Landscape: LabCorp faces intense competition from its major competitor, Quest Diagnostics, 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. As a result, LabCorp and other commercial labs compete with hospital-affiliated labs primarily based on the quality of service.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for LabCorp’s 2022 earnings has moved down by 1.9% to $19.87.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $14.95 billion, suggesting a 7.2% decline from the 2021 comparable figure.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and Medpace Holdings, Inc. (MEDP - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #2 (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 gained 4.5% against the industry’s 29.2% fall.
ShockWave Medical, sporting a Zacks Rank #2 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 33.7% against the industry’s 25.3% fall in the past year.
Medpace Holdings, sporting a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.
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Here's Why Investors Should Retain LabCorp (LH) Stock for Now
Laboratory Corporation of America Holdings, or LabCorp (LH - Free Report) , is gaining from the strength in its Drug Development business. The company’s continued efforts to identify and expand in high-growth opportunity areas instils optimism. However, stiff competition and foreign exchange headwinds do not bode well.
In the past year, the Zacks Rank #3 (Hold) stock has lost 18.3% compared with a 9.7% plunge of the industry and 18.1% fall of S&P 500.
The renowned healthcare diagnostics company has a market capitalization of $20.89 billion. The company’s earnings surpassed estimates in the trailing three quarters and missed in one, delivering a surprise of 6.06% on average.
Let’s delve deeper.
Factors At Play
Covance Drug Development Growth Continues: LabCorp is benefiting from collaborations with leading pharmaceutical and biotechnology companies with whom it started to work on potential antivirals, treatments and vaccines.
In 2022, the company enhanced its central laboratory presence and drug development capabilities in Japan by expanding CB Trial Laboratory. This central laboratory is co-managed by LabCorp Drug Development and a renowned Japan-based clinical laboratory testing services provider, BML. Under the collaboration, LabCorp and BML will start working on a new laboratory facility in Kawagoe, Saitama, extending capacity and services for pharmaceutical and biotechnology clients.
Targeted Development in High-Growth Area: In its efforts to identify and expand in high-growth opportunity areas, LabCorp launched the Neurofilament Light Chain (NfL) blood test to facilitate the detection and verification of the signs of neurodegenerative disease. This widely accessible test provides direct evidence of neurodegeneration and neuronal injury. It aids in diagnosing neuronal injury resulting from brain injury, such as a concussion or from diseases like multiple sclerosis, Alzheimer’s and Parkinson’s.
In May 2022, the company announced the launch of an at-home collection kit for diabetes screening, which measures hemoglobin A1c (HbA1c) from a small blood sample. With the introduction of the kit, consumers can access the diabetes risk test kit and other health and wellness tests through “Labcorp OnDemand.”
Downsides
Exposed to Currency Headwind: With LabCorp deriving a huge share of its revenues internationally, it remains highly exposed to currency fluctuations. Unfavorable currency movements have been a major dampener over the last few quarters, as in the case of other important MedTech players too.
Competitive Landscape: LabCorp faces intense competition from its major competitor, Quest Diagnostics, 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. As a result, LabCorp and other commercial labs compete with hospital-affiliated labs primarily based on the quality of service.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for LabCorp’s 2022 earnings has moved down by 1.9% to $19.87.
The Zacks Consensus Estimate for its 2022 revenues is pegged at $14.95 billion, suggesting a 7.2% decline from the 2021 comparable figure.
Key Picks
A few better-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , ShockWave Medical, Inc. (SWAV - Free Report) and Medpace Holdings, Inc. (MEDP - Free Report) .
AMN Healthcare has a long-term earnings growth rate of 3.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 15.7%, on average. It currently flaunts a Zacks Rank #2 (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 gained 4.5% against the industry’s 29.2% fall.
ShockWave Medical, sporting a Zacks Rank #2 at present, has an estimated growth rate of 33.1% for 2023. The company’s earnings surpassed estimates in all the trailing four quarters, the average beat being 180.1%.
ShockWave Medical has outperformed its industry in the past year. SWAV has gained 33.7% against the industry’s 25.3% fall in the past year.
Medpace Holdings, sporting a Zacks Rank #1 (Strong Buy), reported third-quarter 2022 EPS of $2.05, which beat the Zacks Consensus Estimate by 39.5%. Revenues of $383.7 million outpaced the consensus mark by 8.1%.
Medpace Holdings has an estimated growth rate of 44.9% for the full-year 2022. MEDP’s earnings surpassed estimates in all the trailing four quarters, the average being 22%.