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December 11, 2013
10:13 EDTLH, DGX, BRLILab Corp. tumbles after guidance misses expectations
Shares of lab testing company Laboratory Corporation of America (LH) are sinking after the company provided lower than expected fiscal 2014 earnings per share guidance. WHAT's NEW: Lab Corp.'s fiscal 2014 earnings per share guidance came in at approximately $6.50, compared with analysts' consensus estimate of $7.54. Lab Corp. noted that its 2014 guidance does not include the effects of any share repurchases by the company next year. Among the factors that Lab Corp. anticipated would negatively impact its results are: Continued muted demand for its tests, continued increases in the number of Americans with high health insurance deductibles and co-payments, and uncertainty related to the Affordable Care Act. "We continue to operate in a very difficult environment," said Lab Corp. CEO David King. ANALYST REACTION: In a note to investors, Canaccord Genuity analyst Jeffrey Frelick responded to Lab Corp.'s news by downgrading the stock. Calling Lab Corp.'s 2014 view "dismal," the analyst said he was surprised by the guidance, given the company's position as the lowest price lab test provider. Nonetheless, he reduced his price target on the stock to $91 from $115 and cut his rating on the shares to Hold from Buy. WHAT'S NOTABLE: Following Lab Corp.'s news, Citigroup analyst Gary Taylor reduced his estimates and price target on another company in the sector, Quest Diagnostics (DGX). Lab Corp.'s cautious statements come in the wake of similar statements by a third lab test provider, Bio-Reference Laboratories (BRLI), stated Taylor. As a result, he trimmed his price target on Quest to $58 from $59, and kept a Neutral rating on the shares. PRICE ACTION: In early training, Lab Corp dropped 8.3% to $91, Quest fell 3.7% to $56.40 and Bio-Reference Laboratories lost 0.7% to $27.60.
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