Labcorp Holdings Inc. LH, or Labcorp, is targeting high-growth areas as part of its expansion. By partnering with health systems and regional local laboratories, the company is leveraging science and innovation to lead in important therapeutic areas. Moreover, the LaunchPad initiative is contributing to strong margin performance. Yet, the adverse macroeconomic impacts and currency fluctuations may dent its growth.
In the past year, this Zacks Rank #3 (Hold) stock has risen 1.3% compared with the 1.2% growth of the industry and a 26.7% increase of the S&P 500 composite.
The renowned healthcare diagnostics company has a market capitalization of $19.18 billion. In the trailing four quarters, the company delivered an average earnings surprise of 2.87%.
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Let’s delve deeper.
Targeted Development in High-Growth Area: Labcorp is focusing more on key growth areas such as oncology, women’s health, autoimmune disease and neurology.The company has consistently reinforced its position as a preferred partner for health systems and regional local laboratories by harnessing science and innovation to expand its leadership in important therapeutic areas and by utilizing data and technology to bring important services and capabilities to its customers.
In August 2024, the company received the FDA’s de novo marketing authorization for the PGDx elio plasma focus Dx liquid biopsy test, which enables the laboratory to perform genomic profiling when tissue is limited or unavailable. The new Global Trial Connect suite of central laboratory solutions has received favorable responses from customers. Additionally, Labcorp’s Precision Oncology portfolio was expanded with newer strategic service offerings such as Labcorp Tissue Complete and OmniSeq INSIGHT circulating tumor DNA. Furthermore, the company is enhancing its consumer-initiated testing platform Labcorp on-demand with several tests, including syphilis and Luteinizing Hormone tests, and standard drugs.
Strategic Acquisitions and Partnerships to Drive Growth: Labcorp’s latest agreement with Ballad Health involves acquiring certain of its outreach services to provide broader access to comprehensive testing and laboratory services, particularly in underserved rural areas. Labcorp also announced a 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.
In addition, Labcorp acquired select assets from Invitae, reflecting its focus on specialty medicine and oncology. In July, the company expanded its collaboration with Ultima Genomics to utilize the company’s sequencing solution and technology. The companies will explore new whole genome sequencing clinical applications, including MRD in patients with early-stage solid tumor cancers.
LaunchPad Initiative Right on Track: Labcorp implemented the LaunchPad initiative to improve business processes and achieve $350 million in savings by 2024.The company 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 continued to focus on expanding its margins through the LaunchPad initiative. The benefits will be driven by rationalizing the location of facilities and talent, leveraging technological advancements and structural enhancements, integrating acquisitions and re-engineering the company’s systems and processes.
Macroeconomic Risks: Labcorp relies on demand for diagnostic testing and drug development services from patients, physicians, hospitals and others. Macroeconomic volatilities including, inflation and potential recessions, may reduce demand and impact customer payments, affecting profitability. Additionally, geopolitical tensions in Ukraine and the Middle East could lower testing volumes, disrupt supply chain and raise costs.
Exposed to Currency Headwind: Labcorp’s huge exposure in international markets makes it vulnerable 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.
In the past 30 days, the Zacks Consensus Estimate for Labcorp’s 2024 has remained constant at $14.52.
The Zacks Consensus Estimate for 2024 revenues is pegged at $12.99 billion, suggesting a 0.7% improvement from the 2023 comparable figure.
Some better-ranked stocks in the broader medical space are Veracyte VCYT, Haemonetics HAE and Phibro Animal Health PAHC.
Veracyte has an estimated 2024 earnings growth rate of 37.2% compared with the industry’s 15.3%. Veracyte’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 520.6%. Its shares have risen 44.5% compared to the industry’s 3.6% growth in the past year.
VCYT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics, carrying a Zacks Rank #2 at present, has an estimated fiscal 2025 earnings growth rate of 15.9% compared with the industry’s 12.3%. Shares of the company have lost 8.3% against the industry’s 9.7% growth. HAE’s earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 2.82%.
Phibro Animal Health, carrying a Zacks Rank #2 at present, has estimated earnings growth rate of 35.3% for fiscal 2025 compared with the industry’s 11.1%. Shares of the company have risen 77.6% compared with the industry’s 9.8% growth over the past year. PAHC’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 25.47%.
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