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On Wednesday, Baird updated its outlook on Laboratory Corporation of America (NYSE:LH), raising the price target slightly to $278 from $277 while maintaining an Outperform rating. The adjustment reflects the inclusion of the recently acquired Invitae (OTC:NVTAQ) into the company's financial guidance. The acquisition, which was finalized on August 5, is expected to contribute approximately $120 million to the company's revenue.
Laboratory Corporation of America has increased its enterprise revenue growth forecast to a range of 6.4%-7.5%, with a new midpoint of $13.007 billion, marking a year-over-year increase of 7%. This updated guidance includes about 100 basis points of growth attributed to Invitae. The company's Diagnostics (LCD) segment is anticipated to grow between 6.9% and 7.9%, with the midpoint also adjusted upwards by 200 basis points to $10.112 billion, a 7.4% rise from the previous year, including a 130 basis points contribution from Invitae.
However, the Biopharma Laboratory Services (BLS) segment's revenue forecast has been slightly decreased at the high end by 70 basis points. The new midpoint is set at $2.895 billion, which represents a 4.4% increase year-over-year. This adjustment is due to a slower recovery in the Early Development sub-segment, although this is somewhat mitigated by ongoing strength in the Central Labs area. Despite these challenges, Early Development is showing signs of recovery with better gross wins and fewer cancellations and is expected to return to revenue growth in the fourth quarter.
The company anticipates the overall operating margin percentage to remain flat compared to the previous year, including a 40 basis points impact from the Invitae acquisition. This is balanced by expected revenue growth and savings from the LaunchPad initiative. The LCD margin is predicted to decline year-over-year due to a 60 basis points impact from Invitae, while the BLS margin is projected to improve.
Laboratory Corporation of America has also revised its EPS guidance to $14.30-$14.90, a decrease of 30 cents at the midpoint to $14.60, which still represents a 7.7% increase year-over-year. This includes a 40 cents dilution from Invitae, partially offset by a 10 cents increase in the base business. Additionally, the guidance accounts for an approximate 5 cents impact from both the CrowdStrike (NASDAQ:CRWD) internet outage and the effects of Hurricane Beryl in the third quarter. Free cash flow projections have been adjusted to $850 million to $1 billion, reflecting a $150 million decrease due to one-time costs related to the Invitae acquisition.
In other recent news, Immutep (NASDAQ:IMMP) Ltd has filed a preliminary financial report with the Securities and Exchange Commission (SEC), providing an overview of its financial activities without disclosing specific financial metrics. This move is part of the company's regular disclosures to keep stakeholders informed about its financial health.
Labcorp Holdings Inc. reported robust growth for the second quarter of 2024, with revenues reaching $3.2 billion and adjusted earnings per share (EPS) of $3.94. The company's free cash flow from continuing operations hit $433 million. A key development during this period was Labcorp's acquisition of select assets from Invitae, a leading medical genetics company, which is expected to bolster Labcorp's growth in 2025.
BofA Securities has updated its outlook on Labcorp, raising the price target to $260 from the previous $240, while maintaining a Buy rating on the stock. This update follows discussions of margin dynamics within the company, particularly in light of the upcoming Invitae acquisition. Despite an anticipated margin decrease in the 2024 fiscal year due to the Invitae deal, the firm's outlook remains positive, expecting the assets to become net accretive to EPS in 2025.
Labcorp's diagnostics revenue grew by 8%, and biopharma laboratory services saw a 1% increase. The company also announced plans to refinance $2 billion of debt maturing over the next 12 months. Additionally, Labcorp's Board of Directors approved a $1 billion increase in its share repurchase authorization.
InvestingPro Insights
In light of Baird's updated outlook on Laboratory Corporation of America (NYSE:LH), it's beneficial to consider recent InvestingPro data and tips. With a market capitalization of $19.29 billion and a forward P/E ratio of 24.1, Laboratory Corporation of America is trading at a significant earnings multiple. This aligns with the Baird's positive sentiment, as the company is also expected to see net income growth this year. The stock has experienced a strong return over the last three months, up 17.16%, reflecting investor confidence which may be partly due to management's aggressive share buybacks and a high shareholder yield, as highlighted in InvestingPro Tips.
Furthermore, the company's solid performance is underscored by a revenue growth of 5.22% over the last twelve months as of Q2 2024, contributing to its status as a prominent player in the Healthcare Providers & Services industry. However, it's worth noting that short-term obligations exceed liquid assets, a point of consideration for investors looking at the company's financial health. For those interested in exploring further, there are additional InvestingPro Tips available that can provide deeper insights into Laboratory Corporation of America's financial metrics and outlook.
With a price close to its 52-week high, currently at 96.33% of that peak, and analysts predicting profitability this year, Laboratory Corporation of America's financial trajectory appears to be on a positive path. The stock's low price volatility could also appeal to investors seeking stability in their portfolio. For readers looking to make an informed decision, more InvestingPro Tips on Laboratory Corporation of America can be found, offering a comprehensive analysis of the company's financial state and future prospects.
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