Why Laboratory Corp. of America Holdings Shares Sank
Dec 11th 2013 2:31PM
Updated Dec 11th 2013 2:32PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Laboratory Corp. of America -- better known as LabCorp, a laboratory testing diagnostic services provider -- sank as much as 12% after updating its 2013 full-year guidance and providing its preliminary 2014 guidance.
So what: According to LabCorp's press release, the company's 2013 full-year EPS forecast is on target to hit $6.90-$7.05, which is within the expectation range of current consensus estimates, with revenue growth of 3%. The wheels fell off the bus, however, with LabCorp's 2014 guidance which calls for just $6.50 in EPS -- well below the $7.56 that Wall Street was anticipating -- on 2% revenue growth. LabCorp listed multiple negatives that are expected to affect its performance in 2014, including an increasing number of Americans with high co-pays and deductibles, government reimbursement uncertainties, and the uncertainties related to the implementation of Obamacare.
Now what: While I'm certainly a fan of laboratory testing with an aging population, investors should already have had LabCorp on their yellow flag warning list for its tepid revenue growth. Over the very long term, this is a business that should see gains as the pathway from the lab setting to clinical research is drastically improving for biopharmaceutical companies. Unfortunately, there just aren't any visible catalysts that I see over the next couple of quarters, or even years, that make me excited about LabCorp, even after today's haircut. It's worth a watchlist add here, but the shroud of uncertainty that management conveys likely means more earnings warnings could be in the offing.
Speaking of putting stocks through the centrifuge...
There's a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.
The article Why Laboratory Corp. of America Holdings Shares Sank originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong . The Motley Fool recommends Laboratory Corp. of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.