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LabCorp Trades Down on Weak 2017 View, Reimbursement Woes
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On May 30, we issued an updated research report on Burlington, NC-based Laboratory Corporation of America Holdings (LH - Free Report) , popularly known as LabCorp. The company is a major player in healthcare diagnostics space, providing comprehensive clinical laboratory services and end-to-end drug development support.
LabCorp’s shares have been consistently trading below the Zacks classified Medical - Dental Supplies industry mark since last month, following an unimpressive first-quarter 2017 result. The company lost 1.8%, compared to a 4.6% gain for the broader industry.
While LabCorp’s diagnostics business was strong, its Covance Drug Development provided dull numbers, dampening the overall top-line performance. The company’s statistics reveal slower revenue conversion from backlog and cancellation of two large clinical studies by sponsors in 2016 to impact the result. This apart, unfavorable foreign exchange remains a drag over the recent past. The reduced guidance for 2017 also fails to indicate chances of respite anytime soon.
There is also apprehension about the tough reimbursement scenario the company is currently going through. During 2016, approximately 12.3% of LabCorp Diagnostics’ revenue was reimbursed under the Clinical Laboratory Fee Schedule (CLFS) and approximately 0.8% was reimbursed under the Physician Fee Schedule (PFS). With changes in government regulations in 2017 and the probability of future net reduction in reimbursement revenue, we expect the scenario to get tougher for LabCorp over time.
Per management, the company has been able to positively compete in a growing addressable market, worth approximately $200 billion. It is expected that the combined revenue growth from a broader platform, increased scale and synergies along with strategic deployment of cash flow will create significant long-term shareholders’ value.
LabCorp continues to flourish with complementary capabilities via meaningful acquisitions. Management believes that the recent buyout of Sequenom will boost the company’s women’s health test menu. The inclusion is assumed to expand the company’s geographic reach, both domestically and internationally.
Zacks Rank & Key Picks
LabCorp carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader medical sector are Luminex Corporation , Inogen, Inc. (INGN - Free Report) and Edwards Lifesciences Corporation (EW - Free Report) . Both Luminex and Inogen sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock added roughly 8.9% over the last three months.
Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of roughly 84.2%.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has roughly added 22% over last three months.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
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LabCorp Trades Down on Weak 2017 View, Reimbursement Woes
On May 30, we issued an updated research report on Burlington, NC-based Laboratory Corporation of America Holdings (LH - Free Report) , popularly known as LabCorp. The company is a major player in healthcare diagnostics space, providing comprehensive clinical laboratory services and end-to-end drug development support.
LabCorp’s shares have been consistently trading below the Zacks classified Medical - Dental Supplies industry mark since last month, following an unimpressive first-quarter 2017 result. The company lost 1.8%, compared to a 4.6% gain for the broader industry.
While LabCorp’s diagnostics business was strong, its Covance Drug Development provided dull numbers, dampening the overall top-line performance. The company’s statistics reveal slower revenue conversion from backlog and cancellation of two large clinical studies by sponsors in 2016 to impact the result. This apart, unfavorable foreign exchange remains a drag over the recent past. The reduced guidance for 2017 also fails to indicate chances of respite anytime soon.
There is also apprehension about the tough reimbursement scenario the company is currently going through. During 2016, approximately 12.3% of LabCorp Diagnostics’ revenue was reimbursed under the Clinical Laboratory Fee Schedule (CLFS) and approximately 0.8% was reimbursed under the Physician Fee Schedule (PFS). With changes in government regulations in 2017 and the probability of future net reduction in reimbursement revenue, we expect the scenario to get tougher for LabCorp over time.
Per management, the company has been able to positively compete in a growing addressable market, worth approximately $200 billion. It is expected that the combined revenue growth from a broader platform, increased scale and synergies along with strategic deployment of cash flow will create significant long-term shareholders’ value.
LabCorp continues to flourish with complementary capabilities via meaningful acquisitions. Management believes that the recent buyout of Sequenom will boost the company’s women’s health test menu. The inclusion is assumed to expand the company’s geographic reach, both domestically and internationally.
Zacks Rank & Key Picks
LabCorp carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the broader medical sector are Luminex Corporation , Inogen, Inc. (INGN - Free Report) and Edwards Lifesciences Corporation (EW - Free Report) . Both Luminex and Inogen sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock added roughly 8.9% over the last three months.
Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of roughly 84.2%.
Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock has roughly added 22% over last three months.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>