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Should You Continue to Retain LH Stock in Your Portfolio?
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Labcorp Holdings Inc. (LH - Free Report) is making strides in expanding testing solutions in strategic growth areas. The company is improving its margin performance through the benefits of the LaunchPad initiative, which is nearing its targeted savings goal. Its strategic partnerships with health systems and regional labs are also poised to boost growth in the upcoming quarters. Meanwhile, uncertain macroeconomic conditions and a debt-laden balance sheet raise worry for Labcorp’s operations.
In the past year, this Zacks Rank #3 (Hold) stock has risen 5.9% compared with the 0.4% growth of the industry and the S&P 500 composite’s 31.5% gain.
The renowned healthcare diagnostics company has a market capitalization of $18.87 billion. With an earnings yield of 6.5%, it surpasses the industry average of 5.4%. In the trailing four quarters, Labcorp delivered an average earnings surprise of 2.8%.
Let’s delve deeper.
Labcorp’s Tailwinds
New Offerings in Key Growth Areas: Labcorp is focusing more on key growth areas such as oncology, women’s health, autoimmune disease and neurology as part of its expansion efforts. In June 2024, the company availed of the Labcorp Tissue Complete comprehensive genomic profiling (CGP) service in Geneva and Shanghai to support global clinical trials. The integration of OmniSeq INSIGHT circulating tumor DNA expanded its liquid biopsy CGP capabilities for solid tumors. The new Global Trial Connect suite of central laboratory solutions received favorable responses from customers.
LH launched the first-trimester screening test to assess preeclampsia risk during pregnancy, the only test of its kind available in the United States. In April, Labcorp received FDA approval as the Humanitarian Use Device for its companion diagnostic to determine patient eligibility for treatment with Pfizer’s gene therapy for hemophilia B. The national launch of the GFAP (glial fibrillary acidic protein) test for early detection of neurodegenerative diseases and neurological injuries was a key milestone.
Focus on Margin Efficiency: To enhance shareholder value, Labcorp implemented the LaunchPad business process improvement initiative, targeting savings of $350 million over the next three years ending 2024. We are pleased to see that the company is on track to deliver $100 million to $125 million of savings this year through this initiative. LH’s 2024-2026 guidance includes a savings target range of $100 million-$125 million annually. Labcorp aims to rationalize the geographic location of facilities and talent, leverage technological advancements and structural enhancements, integrate acquisitions, and re-engineer its systems and processes to drive the benefits.
Image Source: Zacks Investment Research
Upholding “Partner of Choice” Status: Labcorp continues to dominate as a preferred partner for health systems and regional local laboratories. Last month, it completed the acquisition of select BioReference Health assets, expanding Labcorp’s laboratory services network and access to clinical services. The company also acquired select assets from Invitae, enhancing its specialty testing capabilities and the ability to use genetic data to advance clinical trials and treatment regimens in oncology and select rare diseases.
In July, Labcorp entered into a comprehensive strategic collaboration with Florida-based Naples Comprehensive Healthcare to manage its inpatient lab operations and serve as the primary lab for its physician network.
Issues Affecting LH Stock
Macroeconomic Risks: Labcorp’s operations heavily depend on the demand for diagnostic testing and drug development services from patients, physicians, hospitals, medical device companies and others. Global economic volatilities, including inflation, could reduce the demand for these services, affecting the profitability of the company. Added to this, the escalation of the present geopolitical situations in Ukraine and the Middle East can potentially decrease testing volumes, cause disruptions in the supply chain and services and increase the prices of offerings.
Debt Profile: At the end of the second quarter of 2024, Labcorp had short-term borrowings and the current portion of the long-term debt of $2.02 billion, and cash and cash equivalents of $265.1 million. This raises our concern about the company’s ability to meet its immediate debt obligations. Long-term debt (net of current portion) was $3.05 billion compared with $4.05 billion in the first quarter-end.
LH Stock Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for Labcorp’s 2024 earnings per share has decreased 0.4% year over year to $14.61.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $12.98 billion, which suggests a 0.6% rise from the 2023 comparable figure.
TransMedix Group’s earnings are expected to surge 259.7% in 2024. Its shares have rallied 191.6% compared with the industry’s 20.7% growth in the past year. TMDX’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 287.5%.
AxoGen has an estimated 2024 earnings growth rate of 94.1% compared with the industry’s 12.5%. Shares of the company have surged 188.1% compared with the industry’s 20.7% growth in the past year. AXGN’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 96.5%.
Boston Scientific has an estimated earnings growth rate of 17.1% for 2024 compared with the industry’s 12.6%. Shares of the company have rallied 55.2% compared with the industry’s 22.1% growth in the past year. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.2%.
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Should You Continue to Retain LH Stock in Your Portfolio?
Labcorp Holdings Inc. (LH - Free Report) is making strides in expanding testing solutions in strategic growth areas. The company is improving its margin performance through the benefits of the LaunchPad initiative, which is nearing its targeted savings goal. Its strategic partnerships with health systems and regional labs are also poised to boost growth in the upcoming quarters. Meanwhile, uncertain macroeconomic conditions and a debt-laden balance sheet raise worry for Labcorp’s operations.
In the past year, this Zacks Rank #3 (Hold) stock has risen 5.9% compared with the 0.4% growth of the industry and the S&P 500 composite’s 31.5% gain.
The renowned healthcare diagnostics company has a market capitalization of $18.87 billion. With an earnings yield of 6.5%, it surpasses the industry average of 5.4%. In the trailing four quarters, Labcorp delivered an average earnings surprise of 2.8%.
Let’s delve deeper.
Labcorp’s Tailwinds
New Offerings in Key Growth Areas: Labcorp is focusing more on key growth areas such as oncology, women’s health, autoimmune disease and neurology as part of its expansion efforts. In June 2024, the company availed of the Labcorp Tissue Complete comprehensive genomic profiling (CGP) service in Geneva and Shanghai to support global clinical trials. The integration of OmniSeq INSIGHT circulating tumor DNA expanded its liquid biopsy CGP capabilities for solid tumors. The new Global Trial Connect suite of central laboratory solutions received favorable responses from customers.
LH launched the first-trimester screening test to assess preeclampsia risk during pregnancy, the only test of its kind available in the United States. In April, Labcorp received FDA approval as the Humanitarian Use Device for its companion diagnostic to determine patient eligibility for treatment with Pfizer’s gene therapy for hemophilia B. The national launch of the GFAP (glial fibrillary acidic protein) test for early detection of neurodegenerative diseases and neurological injuries was a key milestone.
Focus on Margin Efficiency: To enhance shareholder value, Labcorp implemented the LaunchPad business process improvement initiative, targeting savings of $350 million over the next three years ending 2024. We are pleased to see that the company is on track to deliver $100 million to $125 million of savings this year through this initiative. LH’s 2024-2026 guidance includes a savings target range of $100 million-$125 million annually. Labcorp aims to rationalize the geographic location of facilities and talent, leverage technological advancements and structural enhancements, integrate acquisitions, and re-engineer its systems and processes to drive the benefits.
Image Source: Zacks Investment Research
Upholding “Partner of Choice” Status: Labcorp continues to dominate as a preferred partner for health systems and regional local laboratories. Last month, it completed the acquisition of select BioReference Health assets, expanding Labcorp’s laboratory services network and access to clinical services. The company also acquired select assets from Invitae, enhancing its specialty testing capabilities and the ability to use genetic data to advance clinical trials and treatment regimens in oncology and select rare diseases.
In July, Labcorp entered into a comprehensive strategic collaboration with Florida-based Naples Comprehensive Healthcare to manage its inpatient lab operations and serve as the primary lab for its physician network.
Issues Affecting LH Stock
Macroeconomic Risks: Labcorp’s operations heavily depend on the demand for diagnostic testing and drug development services from patients, physicians, hospitals, medical device companies and others. Global economic volatilities, including inflation, could reduce the demand for these services, affecting the profitability of the company. Added to this, the escalation of the present geopolitical situations in Ukraine and the Middle East can potentially decrease testing volumes, cause disruptions in the supply chain and services and increase the prices of offerings.
Debt Profile: At the end of the second quarter of 2024, Labcorp had short-term borrowings and the current portion of the long-term debt of $2.02 billion, and cash and cash equivalents of $265.1 million. This raises our concern about the company’s ability to meet its immediate debt obligations. Long-term debt (net of current portion) was $3.05 billion compared with $4.05 billion in the first quarter-end.
LH Stock Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for Labcorp’s 2024 earnings per share has decreased 0.4% year over year to $14.61.
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $12.98 billion, which suggests a 0.6% rise from the 2023 comparable figure.
Top MedTech Picks
Some better-ranked stocks in the broader medical space are TransMedix Group (TMDX - Free Report) , AxoGen (AXGN - Free Report) and Boston Scientific (BSX - Free Report) . While TransMedix Group currently sports a Zacks Rank #1 (Strong Buy), AxoGen and Boston Scientific each have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
TransMedix Group’s earnings are expected to surge 259.7% in 2024. Its shares have rallied 191.6% compared with the industry’s 20.7% growth in the past year. TMDX’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 287.5%.
AxoGen has an estimated 2024 earnings growth rate of 94.1% compared with the industry’s 12.5%. Shares of the company have surged 188.1% compared with the industry’s 20.7% growth in the past year. AXGN’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 96.5%.
Boston Scientific has an estimated earnings growth rate of 17.1% for 2024 compared with the industry’s 12.6%. Shares of the company have rallied 55.2% compared with the industry’s 22.1% growth in the past year. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.2%.