Sticking With This Labcorp Price Target as Shares Take a Hit

One of the issues companies with a business model that includes growth by acquisition can face is timing. By that, we refer to the times when the timing of expected acquisitions is delayed. For a private company, it can be a nuisance, but for a public one that includes expected acquisitions in its guidance, when it happen, we tend to see it taken out in the company’s shares. That’s especially true in the current market environment, and that is what we are seeing on Tuesday with the shares of Labcorp (LH) .

In our opening comments on Tuesday, we shared that while Labcorp delivered a September quarter EPS beat, high-single digit revenue gains and impressive operating margin expansion, it also dialed back its 2025 top-line forecast to 7.4% to 8.0% year over year from its prior forecast of 7.5% to 8.6%. On the earnings call, management shared that around $13 million of that revision was tied to foreign exchange, with the balance due to acquisition timing. As the company explained, some of the expected acquisitions are closing later than expected, and a few have slipped into 2026.

Focusing on that overshadows the continued organic growth of the business, which is benefiting from volume gains, but also more favorable pricing tied to the mix of tests being performed. That more favorable mix includes Labcorp’s efforts to grow its outsourced hospital lab business but also leaning into high-growth areas (oncology, women's health, neurology and autoimmune diseases), and other specialized testing. Management also called out the aging population as a driver of not only pricing but also testing volumes.

The conference call also focused on efforts that should help drive overall margins higher in the coming quarters. These include divesting certain underperforming businesses and some facility consolidation for non-core businesses, as well as leveraging AI. During the quarter, Labcorp launched Labcorp Test Finder, a generative AI tool developed with Amazon (AMZN) , and internally, it is investing in AI to improve areas such as pathology, cytology and microbiology. Labcorp also deployed a new FDA-cleared AI platform for digital cytology that enables remote viewing and rapid analysis of cell-based samples, improving turnaround times.

Our Plan for Labcorp Shares

When we step back and consider that the acquisition timing issue is only going to hit Labcorp’s 2025 revenue by a very modest amount, and the company tightened to the upside its EPS and free cash flow guidance for the year, our view is that the shares are being overly punished. We’d rather focus on the volume and pricing trends and prospects for further margin improvement, and in doing so, we will maintain our in-line-with-consensus $300 price target.

However, we are likely to see some firms with pre-earnings price targets between $320 to $342 take those price targets down a peg in the coming days. That could weigh a bit further on the shares, and for now, that’s the reason we will maintain our current rating and position size. We like the steady, non-sexy nature of Labcorp’s business and how it is primed to benefit from hospital outsourcing and our aging population investment strategy.

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At the time of publication, TheStreet Pro Portfolio was long LH and AMZN.