Labcorp Holdings Inc. LH, or Labcorp, is prioritizing key specialty testing areas, such as oncology, women’s health, autoimmune disease and neurology, aiming to tap into strong growth opportunities.  The company maintains a solid pipeline of potential acquisitions that fits its financial strategy and will enhance its organic growth. Strong financial stability also bodes well for the stock. Meanwhile, macroeconomic volatilities and adverse currency fluctuations may dent its growth.

In the past year, this Zacks Rank #3 (Hold) stock has risen 16.5% against the 3.3% fall of the industry and a 13.2% increase of the S&P 500 composite.

The renowned healthcare diagnostics company has a market capitalization of $21.50 billion. In the trailing four quarters, the company delivered an average earnings surprise of 3.16%.

Let’s delve deeper.

Tailwinds for Labcorp

Targeted Development in High-Growth Areas: In 2024, Labcorp enhanced its neurodegenerative diseases testing capabilities with two blood-based biomarkers — the pTau217 test for Alzheimer's disease diagnosis and monitoring and GFAP (glial fibrillary acidic protein) test for early detection of neurodegenerative diseases and neurological injuries. In oncology, the company introduced Plasma Detect, an assay that uses whole genome sequencing and a proprietary machine learning analysis to detect MRD (minimal residual disease).

Meanwhile, the acquisition of select Invitae assets enhances Labcorp’s specialty testing capabilities. As part of its focus on autoimmune disease, the company launched a multiple sclerosis monitoring profile in the fourth quarter of 2024 to monitor neurofilament light chain serum and GFAP values in multiple sclerosis patients. Additionally, it introduced the first companion diagnostic (CDx) assay to identify gastric cancer patients eligible for targeted treatment with VYLOY. The Labcorp OnDemand platform, too, expanded with several consumer-initiated tests.

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Strategic Acquisitions and Partnerships to Drive Growth: During the fourth quarter, Labcorp acquired select assets and the molecular testing location of Lab Works, enhancing access to comprehensive testing and laboratory services in Alabama. It also completed the acquisition of Ballad Health’s select outreach laboratory services in the Appalachian region. In December 2024, Labcorp entered into an agreement with MAWD Pathology Group to acquire select assets of their independent laboratory’s clinical and women’s health testing businesses. 

Earlier, Labcorp closed the acquisition of select assets of BioReference Health's diagnostics business and announced a collaboration with Naples Comprehensive Healthcare to manage its inpatient lab operations. Bolstering its position in specialty medicine and oncology, Labcorp purchased select assets from Invitae, which is expected to drive top-line growth of approximately 10% and be slightly accretive to earnings in 2025.

Solvency, Buybacks and Dividends: Labcorp boasts sound financial health, ending fourth-quarter 2024 with cash and cash equivalents of $1.52 billion and $1.00 billion as short-term borrowings and the current portion of the long-term debt, respectively. The company also rewards shareholders through buybacks and dividends, repurchasing $75 million in the fourth quarter and approximately $1.3 billion still authorized. It also paid $16 million in dividends, maintaining a 19.8% payout ratio.

Factors Weighing on LH

Macroeconomic Risks: Labcorp’s operations rely on demand for diagnostic testing and drug development services from patients, physicians, hospitals, medical device companies and others. In recent times, volatilities in global economic conditions, including inflation, have significantly reduced the demand for these services, affecting the customers’ ability to pay and, consequently, the profitability of the company.  Added to this, the escalation of the present geopolitical situations in Ukraine and the Middle East can potentially decrease testing volumes and cause disruptions in the supply chain and services while driving up costs. 

Exposed to Currency Headwind: Labcorp's huge exposure in international markets makes it vulnerable to currency fluctuations. With the recent upward trend observed in the value of the U.S. dollar, further acceleration expected by analysts in this value will cause the company’s revenues to face a tough situation overseas.

LH Stock Estimate Trend

In the past 30 days, the Zacks Consensus Estimate for Labcorp’s 2025 edged up 0.5% to $16.01.

The Zacks Consensus Estimate for 2025 revenues is pegged at $13.93 billion, suggesting a 7.1% improvement from the 2024 comparable figure.

Top MedTech Stocks

Some better-ranked stocks in the broader medical space are Masimo MASI, Boston Scientific BSX and Cardinal Health CAH.

Masimo has an earnings yield of 2.5%, well ahead of the industry’s -3.6% yield. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 14.4%. Its shares have surged 38.8% against the industry’s 5.5% fall in the past year.

MASI sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boston Scientific, carrying a Zacks Rank #2 (Buy), has an earnings yield of 2.7% compared with the industry’s 1.4%. Shares of the company have rallied 54.8% compared with the industry’s 10.5% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 8.3%.

Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 10.7% compared with the industry’s 9.4%. Shares of the company have rallied 12.1% against the industry’s 3.3% fall. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 9.6%.

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This article originally published on Zacks Investment Research (zacks.com).

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