Delay in reimbursement cut to ease pressure on U.S. lab operators, analysts say

Labcorp Holdings

27/09/2024 15:37

** Delay in cuts to reimbursement rates for some lab tests
under Medicare to aid 2025 rev and earnings of U.S. lab owners
such as Labcorp  LH.N  and Quest Diagnostics  DGX.N , analysts
say
    ** LH shares rise 1.1% to $222.73, DGX shares up nearly 1%
to $155.51 
    ** U.S. Congress on Wednesday deferred cuts to reimbursement
rates from 2025 to 2026
    ** "The delay was in-line with expectations as both LH and
DGX have previously said another delay was likely" - J.P. Morgan
    ** J.P. Morgan and Jefferies analysts, both, estimate an
increased revenue of ~$85 million for DGX and ~$80 million for
LH in FY25, with both saying this is at least the fifth delay in
cuts
    ** "This is also an opportunity for companies to use a
portion of temporarily foregone earnings cuts to re-invest in
operational improvements in their businesses, fund tuck-in M&A
or return value to shareholders" - Jefferies
    ** Including session gains, LH stock down 2.3% and DGX
shares up 12.5% YTD

 (Reporting by Mariam Sunny in Bengaluru)
 ((Mariam.ESunny@thomsonreuters.com))