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Laboratory Corp of America Holdings LH

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LabCorp's Base Businesses Show Strength as Pandemic Tests Fall; We've Raised Our Fair Value Estimate

Debbie S. Wang Senior Equity Analyst

Analyst Note

| Debbie S. Wang |

LabCorp delivered another eye-popping quarter thanks to COVID-19 testing but has also begun to see softening in demand, in keeping with expectations for a deceleration in pandemic PCR testing through the second half of 2021. We’ve boosted our fair value estimate to $247 per share to reflect stronger growth in the non-pandemic testing and the drug development business than we’d expected. The impact of the pandemic has only underscored LabCorp’s significant cost advantage that provides the basis of its narrow economic moat. While quarterly diagnostic revenue rose 62% year over year, adjusted operating margin in this segment increased nearly four-fold, driven primarily by increased COVID-19 test volume.

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Company Profile

Business Description

Laboratory Corporation of America is one of the nation's two largest independent clinical laboratories, with roughly 20% of the independent lab market. The company operates approximately 2,000 patient-service centers, offering a broad range of 5,000 clinical lab tests, ranging from routine blood and urine screens to complex oncology and genomic testing. With the addition of Covance, LabCorp also has a sizable footprint in the global contract research organization market.

358 South Main Street
Burlington, NC, 27215
T +1 336 229-1127
Sector Healthcare
Industry Diagnostics & Research
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type Aggressive Growth
Employees 72,400