Labcorp Faces Challenges with Earnings and COVID-19 Testing

Labcorp Faces Challenges with Earnings and COVID-19 Testing

Labcorp (LH), a leading healthcare diagnostics company, is experiencing a downturn in earnings expectations, leading to a Zacks Rank #5 (Strong Sell). The company provides crucial laboratory services and drug development support to healthcare professionals, pharmaceutical companies, researchers, and patients. However, analysts have slashed their earnings forecasts for Labcorp, contributing to a decline in its ranking.

Labcorp’s shares have shown volatile price movements in 2023, with only a modest 0.3% increase year-to-date, significantly underperforming the general market. The company’s recent quarterly reports have been met with negative market reactions, resulting in regular selling pressure.

During its most recent quarterly release, Labcorp fell short of the Zacks Consensus EPS Estimate by 1.5%, but managed to exceed revenue expectations to some extent. Earnings decreased by 31% compared to the previous year, while sales contracted by 18% year-over-year. The notable reduction in COVID-19 testing contributed to a 40% decline in operating income, totaling $266 million, when compared to the same period last year.

Looking ahead, Labcorp is expected to experience a slowdown in growth in the current fiscal year (FY23) due to reduced COVID-19 testing. Earnings are projected to decrease by more than 30% with 19% lower revenues in FY23 before returning to growth in FY24.

The negative earnings estimate revisions from analysts and the decrease in COVID-19 testing present significant challenges for Labcorp in the near term. With the company currently holding a Zacks Rank #5 (Strong Sell), analysts have adopted a bearish outlook for its earnings performance.

For investors seeking strong stocks, it may be wise to focus on companies with a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). These stocks offer a more positive earnings outlook and have the potential to deliver significant gains in the short term.

– Zacks Investment Research

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