LabCorp Remains at Neutral - Analyst Blog
March 28 2013 - 11:50AM
Zacks
On Mar 28, we retained
Laboratory Corporation of America Holdings (LH) at
Neutral. Although the company’s fourth-quarter earnings missed the
Zacks Consensus Estimate, we are confident about the company
garnering higher revenues from specialized testing, its stable
liquidity position and value added acquisitions.The stock currently
carries a Zacks Rank #3 (Hold).
Why the
Retention?
LabCorp posted dismal
fourth-quarter 2012 results with adjusted earnings per share (EPS)
of $1.54 missing the year-ago number by 1.3% as well as the Zacks
Consensus Estimate of $1.61. Although revenues increased 2.9%, a
mere 2.8% increase in testing volume and a slight increase of 0.7%
in organic volume growth reflect the low-volume-growth environment.
Also, Hurricane Sandy negatively impacted the company’s performance
in the fourth quarter.
Moreover, concerns linger regarding
the on-going reimbursement cut. The government has been attempting
to control reimbursement of healthcare services including clinical
testing. Changes in governmental regulations will have a
significant impact on LabCorp’s operations in 2013. According to
LabCorp, this reduction will negatively affect 2013 revenue by over
$50 million and earnings per share by approximately 35 cents.
However, we are encouraged to note
that LabCorp recorded approximately 40% of total revenues during
the last reported quarter from the genomic, esoteric and anatomic
pathology categories, which is expected to go up to 45% over the
next 3−5 years. The esoteric volume during the quarter increased
3.5% on the back of decent growth in specialized endocrinology and
coagulation businesses, cardiovascular and chronic kidney disease
programs.
As a result, the company is
continuously launching several new tests and has collaborated with
major companies and academic institutions to develop advanced
tests. Given its continuous focus on portfolio expansion, we are
confident about the company garnering higher revenues from
specialized testing, going forward.
Other Stocks to
Consider
While we prefer to remain on the
sidelines on LabCorp, other medical device stocks worth a look are
Given Imaging (GIVN), Cyberonics
Inc. (CYBX) and CytokineticsInc (CYTK).
All these stocks carry a Zacks Rank #1 (Strong Buy).
CYBERONICS INC (CYBX): Free Stock Analysis Report
CYTOKINETCS INC (CYTK): Free Stock Analysis Report
GIVEN IMAGING (GIVN): Free Stock Analysis Report
LABORATORY CP (LH): Free Stock Analysis Report
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