Laboratory Corporation of America Holdings or Labcorp LH is entangled in the current economic uncertainty due to a challenging volume environment for testing laboratories and utilization weaknesses. The stock has a Zacks Rank #5 (Strong Sell).
Over the past year, shares of LabCorp have declined 7.6% against the industry’s 14.9% rise.
As the severity of the pandemic continues to weaken, Labcorp has been witnessing a significant decline in COVID-19 PCR testing volumes for some quarters. Assuming the softness to grow in this segment, the company predicts an 85%-89% decline in COVID-19 testing revenues in the current year compared with 2022.
Meanwhile, Labcorp’s Early Development Research Laboratories business continues to be constrained by non-human primate (NHP)-related supply-chain issues. Although the company expects to resolve the issue by the third quarter, the likelihood of such constraints remains. Added to this, the company’s trend of posting declining margins in the past few quarters is concerning.
Labcorp price | Labcorp Quote
Labcorp derives a huge 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 tough situation overseas.
Added to this, LabCorp faces intense competition from its major competitor, Quest Diagnostics and other commercial laboratories and hospitals.
On a positive note, in June 2023, Labcorp completed the planned spin-off of its wholly-owned Clinical Development and Commercialization Services (“CDCS”) business. The resulting spin-off is expected to provide Labcorp with strategic flexibility and an operational focus to pursue specific market opportunities. It will also help the company to run the business with focused capital structures and capital allocation strategies to drive innovation.
In its efforts to expand further, Labcorp is focusing more on high-growth opportunity areas such as neurodegenerative, autoimmune and liver disease as well as cell and gene therapy. In addition, the company is investing in innovation and technology that supports diagnostic and drug development testing across disease areas, including cancer, Alzheimer’s and other diseases.
Some better-ranked stocks in the broader medical space are Elevance Health, Inc. ELV, Integer Holdings Corporation ITGR and Patterson Companies, Inc. PDCO.
Elevance Health reported second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Integer Holdings reported second-quarter 2023 adjusted EPS of $1.14, beating the Zacks Consensus Estimate by 15.2%. Revenues of $400 million surpassed the Zacks Consensus Estimate by 8.9%. It currently carries a Zacks Rank #2.
Integer Holdings has a long-term estimated growth rate of 12.1%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 8.4%.
Patterson Companies has a Zacks Rank of 1. PDCO has an estimated long-term growth rate of 9.2%.
Patterson Companies’ earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 4.5%.
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