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On Tuesday, Evercore ISI analyst upgraded Laboratory Corporation of America (NYSE:LH) Holdings shares, trading on the New York Stock Exchange under the ticker NYSE:LH, from an "In Line" rating to "Outperform." Accompanying the upgrade, the price target for the company's stock was also raised to $265, up from the previous target of $260.
The upgrade reflects a positive outlook on the company's future earnings, with the expectation of outperformance in the coming years. Evercore ISI analysts predict that Laboratory Corp will experience solid growth in base testing, with additional contributions from Invitae (OTC:NVTAQ), diagnostic (Dx) margin expansion, and improvements in the Business Lines Services (BLS) segment. They anticipate that laboratory volume growth will remain robust in 2025, even if healthcare utilization trends soften.
The analysts highlighted that despite the potential for a slight deceleration in healthcare utilization, lab testing volumes tend to be more stable. They foresee a baseline organic volume growth of 3-4% in the diagnostics sector. Furthermore, the acquisition of Invitae is expected to turn accretive by the second half of 2025, contributing positively to the year's earnings.
The report also noted an anticipated expansion of approximately 80 basis points in Dx margins for the year 2025. This improvement is expected despite potential one-time expenses related to factors such as weather, inflation, and labor costs. The analysts project that the earnings per share (EPS) growth for Laboratory Corp in 2025 will likely exceed the long-term target range of 8.5-11.5%.
The forecast for the fiscal year 2025 suggests a 12% growth in EPS, which is above the higher end of the company's long-term target. This estimate takes into account the potential for fewer one-time charges, better emergency department funding, and/or higher-than-anticipated utilization rates. Based on these factors, Evercore ISI has updated its EPS projection for 2025 from $16.18 to $16.37.
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