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LabCorp's Covance Business Bounces Back on Chiltern Buyout

On Nov 28, we issued an updated research report on Laboratory Corporation of America Holdings LH, popularly known as LabCorp. The stock carries a Zacks Rank #3 (Hold).

Over the last six months, LabCorp has been trading above the broader industry. Over this period, The stock has gained 9.1% compared with the industry’s rise of 5.4% during the period. Notably, LabCorp’s third-quarter earnings topped the Zacks Consensus Estimate. A strong year-over-year increase in both earnings and revenues was encouraging too.

LabCorp Diagnostics business was strong on the back of improving price, mix, acquisition and a favorable foreign exchange scenario.

We are also encouraged by the successful closure of the Chiltern International Group’s buyout, a specialty contract research organization. Chiltern is a major partner of LabCorp, serving the top 20 biopharma segments and helping the company focus on the high-growth emerging and mid-market biopharma segments. Following this takeover, the company’s Covance Drug Development reported strong growth in the third quarter after lying low for several quarters. This apart, effective organic flourish and a favorable foreign currency translation boosted the segment’s performance during the period.

Notably, LabCorp is steadily progressing on its three-pronged strategy to drive growth. First, the company strongly focuses on research and development in collaboration with academic institutions in order to gain traction in the growing lab testing market.

Secondly, LabCorp increasingly deploys its integrated testing capabilities, industry leading science and innovative technology offerings to establish strategic partnerships with providers of medical testing. Moreover, investors are looking forward to a long-standing strategic collaboration with 23andMe, which has already demonstrated an impressive growth trajectory.

Finally, LabCorp's core diagnostic scheme is based on innovation in data integration and in tools to support enhanced connectivity, reporting and decision support. The company also lays emphasis on extending its core testing capabilities beyond the traditional health care setting.

On the flip side, the current economic uncertainty including a challenging volume environment for testing laboratories and utilization weaknesses are looming large as headwinds.Additionally, the company operates in a stiff competitive landscape. Meanwhile, apprehensions about a tough reimbursement scenario further intensify concerns for the company.

Key Picks

A few better-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS, Myriad Genetics, Inc. MYGN and Luminex Corporation LMNX. While PetMed and Myriad sport a Zacks Rank #1 (Strong Buy), Luminex carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has rallied roughly 79.1% in a year.

Myriad Genetics has a long-term expected earnings growth rate of 15%. The stock has gained 8.5% over the last three months.

Luminexhas a long-term expected earnings growth rate of 15.2%. The stock has rallied 14.9% over the last three months.

Investor Alert: Breakthroughs Pending

A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.

Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.

Click here to see them >>


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PetMed Express, Inc. (PETS) : Free Stock Analysis Report
 
Luminex Corporation (LMNX) : Free Stock Analysis Report
 
Myriad Genetics, Inc. (MYGN) : Free Stock Analysis Report
 
Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report
 
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