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On Tuesday, Truist Securities expressed continued confidence in Laboratory Corporation of America (NYSE:LH), maintaining a Buy rating and a $285.00 price target on the company’s shares. With a market capitalization of $20.3 billion and an overall "GOOD" financial health rating according to InvestingPro, LabCorp stands as a prominent player in the Healthcare Providers & Services industry. The endorsement follows LabCorp’s announcement of its agreement to purchase additional oncology-focused laboratory testing assets from BioReference Health (OPK, NR) for $192.5 million, with potential additional payments of up to $32.5 million.
The acquisition, expected to be finalized in the second half of 2025, aligns with LabCorp’s financial and strategic objectives and is anticipated to immediately contribute to earnings. The assets currently generate approximately $85 million to $100 million in annual revenue and are seen as a strategic fit for LabCorp, enhancing its presence in oncology and esoteric testing capabilities. Currently trading near its 52-week high with a PEG ratio of 0.32, InvestingPro analysis suggests the stock is attractively valued relative to its growth potential. Discover 8 more exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.
This transaction builds on LabCorp’s previous $237.5 million purchase of BioReference’s clinical testing and reproductive health assets outside of New York and New Jersey, which closed in the third quarter of 2024 and also had an annual revenue of around $100 million. The ongoing mergers and acquisitions strategy, which saw LabCorp invest $839.0 million in various assets in 2024, including Invitae (OTC:NVTAQ), BioReference, Baystate Medical (TASE:BLWV) Center, Westpac Labs, and Providence Medical Foundation, supports the company’s target of 1.5% to 2.5% annual revenue growth from such activities.
Truist Securities highlights LabCorp’s robust cash flow, with $1.01 billion in free cash flow in 2024 and a forecast of $1.10 billion to $1.25 billion for the fiscal year 2025, estimating it at $1.19 billion. With $1.52 billion in cash and a net debt to the last twelve months’ adjusted EBITDA ratio of 2.2x at the end of 2024, LabCorp is recognized for its strong financial flexibility, which is expected to support continued strategic investments to enhance its core business trends. The company’s solid performance is reflected in its 6.97% revenue growth over the last twelve months and healthy gross profit margin of 27.86%. The reiteration of the Buy rating and the $285 price target reflects Truist’s positive outlook on LabCorp’s strategic acquisitions and financial health.
In other recent news, Labcorp has announced an agreement to acquire select assets of BioReference Health for up to $225 million. This acquisition, which includes oncology-focused laboratory testing businesses, aims to enhance Labcorp’s oncology and clinical testing services. The assets being acquired generate approximately $85 million to $100 million in annual revenue, and the transaction is expected to be accretive to Labcorp’s earnings from the first year. In analyst updates, Citi upgraded Labcorp’s stock rating from Neutral to Buy, raising the price target to $300, reflecting optimism in the company’s core diagnostics business and strategic acquisitions. Truist Securities also increased Labcorp’s price target to $285, maintaining a Buy rating due to strong fourth-quarter performance and promising 2025 guidance. Labcorp has further expanded its oncology portfolio by releasing the Labcorp Plasma CompleteTM, a liquid biopsy test for comprehensive genomic profiling in advanced cancer care. This test, designed to aid oncologists in personalizing treatment plans, underscores Labcorp’s commitment to enhancing its cancer diagnostic services. These recent developments highlight Labcorp’s strategic growth initiatives and positive analyst sentiment.
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