LabCorp (LH) at a 52-Week High: What’s Driving the Stock?

Shares of Laboratory Corporation of America Holdings LH scaled a new 52-week high of $165.18 on Dec 20, closing nominally lower at $163.03. The company has gained 8.4% over the last six months, much higher than the broader industry’s gain of 2.4% with respect to share price. The stock has a market cap of $16.59 billion.

Taking the stable stock performance into consideration, we expect LabCorp to scale higher in the coming quarters. Also, the company’s long-term expected earnings growth rate of 9.9% holds promise.

Further, the company’s estimate revision trend for the current year is favorable. In the past 60 days, five estimates moved up while four shifted down. Consequently, estimates were up from $9.51 per share to $9.52.

The company also has a trailing four-quarter average positive earnings surprise of 2.3%. Its positive long-term growth of 9.9% holds promise as well.

LabCorp recently announced that Agilent’s Dako pathology division’s development — the PD-L1 IHC 28-8 pharmDx assay — is now available in the United States for new expanded use. Per LabCorp, this test received U.S. approval to be used as a complementary diagnostic with Bristol-Myers Squibb Company’s BMY OPDIVO (nivolumab) for two new indications — metastatic urothelial carcinoma or bladder cancer and squamous cell carcinoma of the head and neck.

Encouraged by a strong third-quarter show and a gradually improving foreign exchange scenario, the company raised its 2017 outlook.

Net revenue growth is maintained in the band of 8-8.5% year over year, ahead of the earlier range of 5-6.5%. Free cash flow expectation has been raised to a new band of $970-$1010 million (previous range: $925-$975 million) up 8-13% from the prior year.

In the recent past, the company successfully closed the Chiltern International Group’s buyout, a specialty contract research organization. Chiltern is a major partner of LabCorp, serving the top 20 biopharma segments and helping the company focus on the high-growth emerging and mid-market biopharma segments. Following this takeover, the company’s Covance Drug Development reported strong growth in the third quarter after several quarters of tepid performance.

Zacks Rank & Key Picks

LabCorp carries a Zacks Rank #3 (Hold).

A few better-ranked medical stocks are athenahealth, Inc. ATHN and Align Technology, Inc. ALGN, both of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

athenahealth has a long-term expected earnings growth rate of 22.3%. The stock has rallied roughly 27.3% over a year.

Align Technology has a long-term expected earnings growth rate of 28.9%. The stock has gained 137.9% in a year.

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