On Tuesday, Piper Sandler initiated coverage on Laboratory Corporation of America (NYSE:NYSE:LH) stock, commonly known as LabCorp, assigning a Neutral rating to the stock with a price target of $235.
The firm acknowledges LabCorp's longstanding leadership in the diagnostics services industry and its potential role as a key player in the consolidation of smaller, high-growth laboratories.
LabCorp, recognized for its extensive history in diagnostic services, is expected to remain a significant component of the industry landscape. The company is positioned as one of the two major entities in the large reference lab sector poised for consolidation, along with anticipated legislative and regulatory enhancements.
Piper Sandler projects that LabCorp will experience mid-single-digit revenue growth and nearly 10% EPS growth. Despite these positive growth prospects, the firm suggests that the stock's performance over the past six months indicates a balanced risk/reward scenario at the current levels, leading to the decision to start with a Neutral rating.
The price target of $235 set by Piper Sandler reflects the firm's assessment of LabCorp's current market position and future prospects. The target is based on the company's expected role in industry consolidation and its projected financial growth.
Investors and market watchers will be monitoring LabCorp's stock performance in relation to this new coverage and price target, as well as the company's strategic moves in the evolving landscape of the diagnostics services industry.
In other recent news, Labcorp Holdings Inc. issued $2 billion in senior notes and secured impressive growth in Q2, with revenues hitting $3.2 billion and adjusted earnings per share of $3.94. The company's diagnostics revenue rose by 8%, while biopharma laboratory services saw a 1% increase. Labcorp's Board of Directors also approved a $1 billion increase in its share repurchase authorization.
Investment banking firm Jefferies, Baird, and BofA Securities have all raised their price targets on Labcorp shares, reflecting confidence in the company's core diagnostics business and its ongoing mergers and acquisitions activity.
The recent acquisition of Invitae (OTC:NVTAQ) is expected to significantly contribute to Labcorp's revenue, with BofA Securities expecting the Invitae assets to become net accretive to earnings per share in 2025.
Labcorp also announced plans to refinance $2 billion of debt maturing over the next 12 months. The net proceeds from the senior notes offering, estimated at approximately $1.982.1 million after expenses, are expected to be used for redeeming or repaying existing indebtedness, including Labcorp's outstanding 2.300% Senior Notes due 2024, its 3.600% Senior Notes due 2025, and $350 million of borrowings under its revolving credit facility.
These are the recent developments for Labcorp, reflecting a positive outlook on the company's ability to achieve its financial targets for the year.
InvestingPro Insights
Recent data from InvestingPro adds depth to Piper Sandler's analysis of Laboratory Corporation of America (NYSE:LH). As of the last twelve months ending Q2 2024, LabCorp reported revenue of $12.49 billion, with a revenue growth of 5.22%. This aligns with Piper Sandler's projection of mid-single-digit revenue growth for the company.
LabCorp's P/E ratio (adjusted) stands at 23.44, which is lower than the reported P/E of 42.02, suggesting the stock might be more reasonably valued than it initially appears. This could support Piper Sandler's Neutral rating, indicating a balanced risk/reward scenario.
InvestingPro Tips highlight that LabCorp's management has been aggressively buying back shares, which often signals confidence in the company's future prospects. Additionally, the company is expected to see net income growth this year, potentially supporting Piper Sandler's forecast of nearly 10% EPS growth.
It's worth noting that LabCorp is trading near its 52-week high, with its current price at 93.71% of the 52-week high. This proximity to the high point aligns with Piper Sandler's view that the stock's recent performance suggests a balanced risk/reward at current levels.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for LabCorp, providing a deeper understanding of the company's financial health and market position.
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