Labcorp (LH) Gains From New Collaborations Amid FX Issues
Labcorp LH has been benefiting from the solid execution of its strategic priorities. Investment in targeted high-growth areas should continue to drive the momentum. The company faces headwinds from macroeconomic uncertainties and currency translations. The stock carries a Zacks Rank #3 (Hold) currently.
As part of its expansion efforts, Labcorp is focusing more on key growth areas such as oncology, women’s health, autoimmune disease and neurology. The company’s ability to develop, license and ultimately scale specialty testing, including companion diagnostics, can be pivotal in significantly driving near-term growth. Labcorp has consistently reinforced its position as a preferred partner for health systems and regional local laboratories. New deal announcements, such as purchasing assets of Invitae, showcase its robust business development pipeline and also further its strategy to launch and scale specialty testing in oncology and rare diseases areas.
Furthermore, the company is well-placed for long-term success in Cell & Gene Therapy, expanding into the consumer market and international growth through the specialty testing and biopharma business. In June 2024, Labcorp Tissue Complete comprehensive genomic profiling (CGP) service was made available in Geneva and Shanghai to support global clinical trials. The integration of OmniSeq INSIGHT circulating tumor DNA expanded Labcorp’s leadership in liquid biopsy comprehensive genomic profiling for solid tumors. Also, the new Global Trial Connect suite of central laboratory solutions for improving clinical trial speed and efficiency received a favorable response from customers. Added to this, several new tests, including standard drug, complete drug comprehensive testosterone, HIV and complete heart health, are being made available through the Labcorp OnDemand platform.
Labcorp Price
Labcorp price | Labcorp Quote
The Biopharma Laboratory Services (“BLS”) business is benefiting from collaborations with leading pharmaceutical and biotechnology companies with whom it started to work on potential antivirals, treatments and vaccines. Revenue-wise, Biopharma's growth continues to be driven by strength in central laboratories, its largest part, which improved by 9% in the second quarter of 2024. The Early Development business is also recovering sequentially, led by reduced cancellations and improvement in bookings, and is expected to generate higher revenues in the second half of the year.
Meanwhile, Labcorp’s operation is heavily dependent on the demand for diagnostic testing and drug development services from patients, physicians, hospitals, medical device companies and others. Volatilities in global economic conditions, including inflation and the risk of short or long-term recessions, could reduce the demand for these services, affecting the customers’ ability to pay and, consequently, 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. In the second quarter, the cost of revenues went up by 4.7% year over year. SG&A expenses increased 10.3%, mainly due to higher personnel costs.
Further, Labcorp's huge exposure in international markets makes it vulnerable to currency fluctuations. In 2023, the BLS segment derived nearly 58% of its revenues from overseas, while Dx also earned a modest portion in Canada and a relatively small amount in the rest of the world. An approximate 13.7% of the company's revenues were denominated in currencies other than the U.S. dollar in the first half of 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. In the second quarter, both BLS and Dx revenue growth was partially offset by unfavorable foreign currency translation of 0.1%.
Key Picks
Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, DaVita Inc. DVA and Masimo MASI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical reported second-quarter adjusted earnings per share (EPS) of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%.
Intuitive Surgical has a long-term earnings growth rate of 16.1% for 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.97%.
DaVita reported second-quarter 2024 adjusted earnings of $2.59, which surpassed the Zacks Consensus Estimate by 4.9%. Revenues of $3.19 billion topped the Zacks Consensus Estimate by 0.7%.
DVA has an estimated long-term earnings growth rate of 17.5% compared with the S&P 500’s 12.5%. The company surpassed earnings estimates in each of the trailing four quarters, the surprise being 2.34%.
Masimo shares have risen 13.2% in the past year. Estimates for the company’s earnings have increased from $3.63 to $3.83 for 2024 and from $3.97 to $4.20 for 2025 in the past 30 days.
MASI’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 14.6%. In the last reported quarter, it posted an earnings surprise of 11.7%.
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