Shares of Laboratory Corp. of America Holdings (LH) attained a new 52-week high of $109.84 in mid-day trading on Dec 30. The bullish run reflects the company's increased focus in innovative product launches, consistent share buybacks and better-than-expected third-quarter 2014 results.
LabCorp's shares eventually closed at $109.58 on the day, translating into a decent one-year return of around 20%. The year-to-date return on the stock is roughly 21%. Currently, this Burlington, NC-based company providing medical laboratory tests and services has a market cap of $9.3 billion while average volume of shares traded over the past one day is roughly $1.3 million.
Over the last few months, LabCorp has been in the news for the launch of new products as well as the strategic acquisitions it has undertaken since the beginning of 2014. The aim is essentially to expand geographical reach and diversify its product portfolio.
Recently, LabCorp introduced its EV-D68 PCR test that can detect the presence of enterovirus D68 (EV-D68) in one's respiratory sample. This virus is associated with severe respiratory illness that primarily affects pediatric patients. This test will help physicians to arrest the EV-D68 outbreak that has continued through late fall to affect more than 1,000 in the U.S.
Market is also upbeat about LabCorp's last month's decision to purchase Covance Inc. (CVD) for a total enterprise value of $5.6 million. The company expects this transaction to be accretive to adjusted earnings per share in 2015 before synergies. Moreover, LabCorp estimates annual cost synergies in excess of $100 million, to be fully realized within three years of closing the transaction. We believe this acquisition will create a new industry leader in the laboratory testing and CRO spaces that will operate as a premier full-service drug development organization.
In an attempt to bolster its leadership position in scientific innovation, the company acquired forensics and DNA analysis services provider, Bode Technology Group. The latter will offer forensic DNA analysis, DNA collection products and relationship testing services in the international market as a subsidiary of LabCorp.
In Sep 2014, to enhance its innovativeclinical decision support programs, LabCorp agreed to buy LipoScience, Inc. (LPDX) for a total enterprise value of $63 million. As a result of this buyout, LipoScience’s nuclear magnetic resonance (NMR) LipoProfile test will allow LabCorp to expand its broader differentiated knowledge services for physicians and patients.
Meanwhile, the company reported impressive third-quarter 2014 results, with earnings of $1.80 per share ahead of the Zacks Consensus Estimate of $1.75. However, the bottom line remained unchanged from the year-ago quarter equivalent. On the other hand, revenues increased 6.1% year over year to $1,551.8 million, exceeding the Zacks Consensus Estimate of $1,505 million.
During the last reported quarter, LabCorp repurchased stocks worth $66 million bringing its year-to-date share buyback to $228 million. The company is left with $824 million of authorization under the approved share repurchase plan. A consistent share buyback program has resulted in a 4.8% decline in the outstanding share count.
Currently, both LabCorp and Covance carry a Zacks Rank #3 (Hold). Some better-ranked med/dental-supply stocks are Bio-Reference Laboratories Inc. (BRLI) and AmerisourceBergen Corporation (ABC). While Bio-Reference Laboratories sports a Zacks Rank #1 (Strong Buy), Amerisource holds a Zacks Rank #2 (Buy).
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