On Monday, Baird maintained its Outperform rating on shares of Laboratory Corporation of America (NYSE:LH), while slightly increasing the stock's price target from $258.00 to $261.00. The adjustment follows a period of limited news since the last update on June 20, after a tour of the Central Lab in Indianapolis and recent updates in the Lab and CRO sectors.
The firm's analyst highlighted that the current market sentiment towards Laboratory Corporation of America may be unduly harsh due to a few minor issues. These issues were described as either transient or based on sentiment rather than fundamental business performance.
The analyst emphasized that the market is not fully accounting for the company's potential beyond 2025 or the favorable risk/reward ratio given its current low valuation.
In other recent news, Labcorp delivered a robust performance in Q1 2024, reporting total revenue of $3.2 billion and adjusted earnings per share of $3.68, marking a 7% increase from the previous year. The company also announced the acquisition of selected assets from Invitae (OTC:NVTAQ), a move expected to enhance Labcorp's specialty testing capabilities, particularly in oncology and rare diseases.
The acquisition, valued at $239 million, is approved by the United States Bankruptcy Court and is projected to contribute $275 million to $300 million to Labcorp's annual revenue.
In line with its global aspirations, Labcorp plans to establish a new holding company, Labcorp Holdings Inc. The company expects full-year enterprise revenue to grow by 4.8% to 6.4%, with diagnostics and biopharma revenue also projected to increase.
Still, decreased operating cash flow from continuing operations and challenges in the early development segment within the Biopharma Laboratory Services were also noted.
Analysts at Baird have raised Labcorp's target price from $256 to $258 following a detailed valuation analysis. The 'Outperform' rating on the stock remains unchanged. Risks identified by the analysts include potential regulatory changes, the impact of COVID-19 on testing volumes, and cybersecurity incidents, among others. These recent developments highlight Labcorp's strategic growth and financial performance.
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