Labcorp Holdings Inc. LH, or Labcorp, is positioning itself for sustained growth with a series of strategic acquisitions and partnerships. With a growing emphasis on cell and gene therapy, the company aims to become a preferred development lab by leveraging its drug development expertise, scientific prowess and pharma relationships. The LaunchPad initiative also nears its targeted goal, which is highly promising. However, adverse macroeconomic impacts and currency fluctuations may dent the company’s growth.
In the past year, this Zacks Rank #3 (Hold) stock has risen 13% compared with the 12.2% growth of the industry and a 32.9% increase of the S&P 500 composite.
The renowned healthcare diagnostics company has a market capitalization of $20.59 billion. In the trailing four quarters, the company delivered an average earnings surprise of 2.87%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Let’s delve deeper.
Factors at Play
Strategic Acquisitions and Partnerships to Drive Growth: Labcorp’s robust pipeline of potential hospital and local laboratory acquisitions presents ample opportunities for its growth. Its latest agreement with Ballad Health will provide broader access to laboratory services, particularly in underserved rural areas.
Labcorp also announced a strategic collaboration with Florida-based Naples Comprehensive Healthcare and an agreement to acquire select assets of Lab Works, an independent clinical laboratory located in Alabama. In September, it closed the acquisition of select assets of BioReference Health's diagnostics business.
Labcorp’s acquisition of select assets from Invitae aligns with its focus on specialty medicine and oncology. In July, Labcorp expanded its collaboration with Ultima Genomics to explore new whole genome sequencing clinical applications, including MRD in patients with early-stage solid tumor cancers. Other major acquisitions closed this year include health system agreements with Baystate Health in Massachusetts, Providence’s outreach laboratory business in Northern California and Orange County and a regional lab in California.
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Biopharma Laboratory Service Expansion Continues: With Cell and gene therapy being a growing focus of biopharma pipelines, the company sees a big opportunity to leverage its strong drug development capabilities, scientific expertise and pharma relationships to become a development lab of choice.
Labcorp has already established itself as a key partner to biopharma in companion diagnostics (CDx), supporting the international expansion of specialized diagnostics. As its pipeline grows, the company aims to leverage its scientific leadership in new markets through a unique set of capabilities, including a global central laboratory footprint and deep customer relationships in diagnostics and biopharma laboratory services. In September 2024, Labcorp bolstered its global molecular bioanalytical capacity by opening a new facility in Greenfield, IN.
LaunchPad Initiative Right on Track: To enhance shareholder value, Labcorp implemented a new LaunchPad business process improvement initiative, targeting savings of $350 million over the next three years ending 2024. We are pleased to see that LH is on track to deliver $100 million to $125 million of savings this year through this initiative, consistent with its long-term target through 2024-2026. Labcorp has placed a continued focus on expanding its margins through the initiative by rationalizing the geographic location of facilities and talent, leveraging technological advancements and structural enhancements, integrating acquisitions and re-engineering the company’s systems and processes.
Factors Weighing on LH
Macroeconomic Risks: Volatilities in global economic conditions, including inflation and the risk of short or long-term recessions, could reduce the demand for Labcorp’s services and profitability. 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. In the third quarter, the cost of revenues went up by 7.8% year over year.
Exposed to Currency Headwind: Labcorp's huge exposure in international markets makes it vulnerable to currency fluctuations. An approximate 13.6% of the company's revenues were denominated in currencies other than the U.S. dollar in the nine months ended Sept. 30, 2024. 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.
LH Stock Estimate Trend
In the past 30 days, the Zacks Consensus Estimate for Labcorp’s 2024 earnings has moved down 1 cent to $14.54.
The Zacks Consensus Estimate for 2024 revenues is pegged at $12.99 billion, suggesting a 0.7% improvement from the 2023 comparable figure.
Key MedTech Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, Boston Scientific BSX and Penumbra PEN.
Haemonetics has an earnings yield of 3.39% compared to the industry’s 1.55% yield. Haemonetics’ earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed on one occasion, the average surprise being 2.82%. Its shares have risen 1.8% compared with the industry’s 23.1% growth in the past year.
HAE carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boston Scientific, carrying a Zacks Rank #2 at present, has a long-term estimated earnings growth rate of 13.8%. Shares of the company have surged 60.2% compared with the industry’s 23.1% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.29%.
Penumbra, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 33.4% for 2024 compared with the industry’s 15.9%. Shares of Penumbra have risen 4.4% compared with the industry’s 20% growth over the past year. PEN’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 10.54%.
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Boston Scientific Corporation (BSX) : Free Stock Analysis Report
Labcorp (LH) : Free Stock Analysis Report
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