Should You Continue to Hold Labcorp Stock in Your Portfolio?

Labcorp Holdings Inc. LH, or Labcorp’s strong focus on key areas such as oncology, women’s health, autoimmune disease and neurology is poised to help it grow in the upcoming quarters. The company maintains a steady pipeline of potential deals that support its financial strategy and will enhance its organic growth. A strong balance sheet also bodes well for the stock. Meanwhile, macroeconomic volatilities and fierce competition may dent its growth.

In the past year, this Zacks Rank #2 (Buy) stock has risen 26.5% against the 2.6% fall of the industry. It has also outpaced the S&P 500 composite’s 10.8% growth.

The renowned healthcare diagnostics company has a market capitalization of $20.75 billion. The company has an earnings yield of 6.5% compared to the industry’s 5.9% yield. In the trailing four quarters, Labcorp delivered an average earnings surprise of 2.3%.

Let’s delve deeper.

Tailwinds for Labcorp

Targeted Development in High-Growth Areas: Labcorp is focusing more on key specialty testing areas such as oncology, women’s health, autoimmune disease and neurology, which represent major growth opportunities. In 2024, Labcorp enhanced its neurodegenerative disease testing capabilities with two blood-based biomarkers — the pTau217 test for Alzheimer's disease diagnosis and monitoring, and the GFAP (glial fibrillary acidic protein) test for early detection of neurodegenerative diseases and neurological injuries.

In oncology, the company expanded its offerings with Plasma Detect, presently in 12 global trials across several tumor types. The Precision Oncology portfolio added new strategic service offerings such as Labcorp Tissue Complete and OmniSeq INSIGHT circulating tumor DNA. A key milestone was the FDA’s de novo marketing authorization for the PGDx elio plasma focus Dx. As part of its focus on autoimmune disease, Labcorp launched a multiple sclerosis monitoring profile to monitor neurofilament light chain serum and GFAP values in multiple sclerosis patients. The company also introduced the first companion diagnostic (CDx) assay to identify gastric cancer patients eligible for targeted treatment with VYLOY.

Strategic Acquisitions and Partnerships to Drive Growth: In March 2025, Labcorp announced an agreement to acquire select oncology and related clinical testing assets from BioReference Health, reinforcing its position as a leader in oncology. The company also completed the acquisition of key assets from North Mississippi Health Services' Ambulatory Outreach Laboratory business and became the referral lab for its seven hospitals and clinical laboratories. During the first quarter, Labcorp invested $211 million in acquisitions and partnerships to support its strategic growth initiatives.

In 2024, the company strengthened its national presence through key acquisitions, including Lab Works’ molecular testing site in Alabama, Ballad Health’s outreach labs and assets from MAWD Pathology Group. It also launched a new H5 bird flu test with the CDC. Labcorp also acquired assets from BioReference Health and Invitae, partnered with Naples Comprehensive Healthcare and expanded its collaboration with Ultima Genomics for advanced genome sequencing. Additional deals with Baystate Health, Providence and a California lab, along with a partnership with Hawthorne Effect, position Labcorp for continued growth through innovation and strategic expansion.

Solvency, Buybacks and Dividends: Labcorp boasts sound financial health, ending the first quarter of 2025 with cash and cash equivalents of $369 million and no short-term debt on the balance sheet. Long-term debt (net of current portion) was $5.64 billion compared with $5.41 billion at the end of 2024. 

Labcorp also returns capital to shareholders through its share repurchase program and dividends. In the first quarter, the company paid out $62 million in dividends, with a dividend payout ratio of 40.4% at the quarter-end.

Factors Weighing on LH

Macroeconomic Risks: Labcorp’s operations rely on demand for diagnostic testing and drug development services from patients, physicians, hospitals, medical device companies and others. In recent times, volatilities in global economic conditions, including inflation, have significantly reduced the demand for these services, affecting the customers’ ability to pay and, consequently, the profitability of the company.  Added to this, the escalation of the present geopolitical situations in Ukraine and the Middle East can potentially decrease testing volumes and cause disruptions in the supply chain and services while driving up costs. 

Competitive Landscape: The commercial laboratory business is fiercely competitive. Hospital-affiliated physicians prioritize accurate and rapid turnaround of testing results, pushing Labcorp and other commercial labs to compete primarily on the basis of service quality. Industry-wide consolidation has allowed larger providers to use cost efficiencies from automated testing, leading to greater price competition. Following the spin-off of Fortrea, the BLS segment faces competition from numerous small providers and a few large global companies, along with periodic price pressures that could impact its profitability and revenues.

LH Stock Estimate Trend

In the past 30 days, the Zacks Consensus Estimate for Labcorp’s 2025 has increased 1 cent to $16.05.

The Zacks Consensus Estimate for 2025 revenues is pegged at $13.90 billion, suggesting a 6.9% improvement from the 2024 comparable figure.

Other Top MedTech Stocks

Some other top-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Hims & Hers Health HIMS and Cencora COR.

Phibro Animal Health has an estimated long-term earnings growth rate of 26% compared with the industry’s 15.7%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 30.6%. Its shares have rallied 37.7% compared with the industry’s 10.7% growth in the past year.

PAHC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hims & Hers Health, currently carrying a Zacks Rank #2, has an earnings yield of 1.3% against the industry’s 11.9% yield. Shares of the company have surged 151.7% compared with the industry’s 32.5% gain. HIMS’ earnings surpassed estimates in two of the trailing four quarters, matched on one occasion and missed on another, the average surprise being 2.8%.

Cencora, carrying a Zacks Rank #2 at present, has an earnings yield of 5.4% compared with the industry’s 4.1%. Shares of the company have rallied 25.8% against the industry’s 22.4% fall. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6%.

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This article originally published on Zacks Investment Research (zacks.com).

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