This
article was originally published by TheStreet.
NEW
YORK (TheStreet) -- The
medical laboratory tests and services company Laboratory Corporation of America (LH_), more
commonly known as LabCorp, serves more than 220,000 clients, including
physicians' offices, hospitals, managed care organizations and pharmaceutical
companies.
LabCorp has been struggling
with growth amid a challenging business environment. Its increasing costs have
outpaced revenue growth, dragging profit margins. In 2014, LabCorp is expecting
just 2% top line growth and an earnings drop. The business's financial strength
is far from stellar, with a lofty debt-to-equity ratio and declining cash reserves.
The company's shares underperformed this year and there are no catalysts at
work that could change this in 2014. Following the recent sell-off, I believe
that the company's shares are a sell on some recovery to low-to-mid-$90s in the
coming weeks.
A week ago, LabCorp issued its 2014 guidance that
came well below Wall Street's expectations.
In 2014, LabCorp is eying revenue growth of just 2% and earnings of $6.50 per
share, significantly below market's expectations of $7.54 per share. For the
current year, LabCorp could record earnings of around $6.98 per share, which is
the mid-point of its updated guidance. In other words, the company is expecting
a 7% drop in earnings in 2014.
Following this disappointing
guidance, the company's shares dropped by 11% the next day, its biggest one-day
decline in more than six years. Investors were clearly taken by surprise.
LabCorp, which is a low cost lab provider, was expected to be one of the few
operators in this industry that could endure the tough market conditions.
The current challenging business environment will continue
through 2014. LabCorp and its competitors, Bio-Reference Laboratories (BRLI_) and Quest Laboratories (DGX_), have been
under pressure the last few years due to … read full
article at TheStreet
