Shares of Laboratory Corporation of America Holdings (LH) slipped to close at $99.15 resulting in a loss of 1.2% for the day with the company’s announcement of a bleak prelim 2014 outlook. For 2014, the company expects to post adjusted earnings per share (EPS), excluding amortization, of $6.50, 16% below the Zacks Consensus Estimate of $7.56 a share. The projection does not take into account the positive impact of any share repurchase activity for 2014.
Keeping in mind the challenging operating environment, the company anticipates feeble revenue growth (of a mere 2%) in the upcoming fiscal. The current Zacks Consensus Estimate for revenues of $5,939 million is ahead of the company’s expectation.
The company also revised its fiscal 2013 guidance. In fiscal 2013 the company expects to report revenue growth of approximately 3%, well below the Zacks Consensus Estimate of $5,820 million.
LabCorp also provided an update on its EPS guidance. Excluding amortization, adjusted EPS for fiscal 2013 is expected to remain in the range of $6.95−$7.05. The current Zacks Consensus Estimate for earnings per share of $7.03 lies within the guided range. The company is slated to release its fourth-quarter and fiscal 2013 results on Feb 7, 2014.
The current economic uncertainty continues to adversely affect LabCorp. The company is currently plagued by several issues like utilization weaknesses and continued increase in Americans with high deductible and high co-insurance plans. Additionally, ongoing government payment and reimbursement issues along with uncertainty related to the implementation of the Affordable Care Act are other looming headwinds. We note that lower healthcare utilization and Medicare payment reductions have also affected LabCorp’s peer Quest Diagnostics’ (DGX) performance in the past.
However, LabCorp remains optimistic about its five-pronged strategy which is expected to revive growth in its businesses and create continued shareholder value. As a part of this strategy, LabCorp is currently working on innovations with academic institutions in order to capture the growing lab testing market with its advanced assays and tools. It is currently working on customer service, IT and laboratory automation besides emphasizing on strategic transactions and comprehensive review of the cost structure.
LabCorp currently carries a Zacks Rank #3 (Hold). Investors interested in the industry may consider stocks like Align Technology Inc. (ALGN) and McKesson Corporation (MCK). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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