Jefferies sees 'softening' volumes for diagnostics firms

Laboratory of America Holdings

05/10/2022 12:05

** Brokerage Jefferies says clinical laboratory companies
could see softening volumes in coming months from weakening
macroeconomic conditions
    ** Says it is tempering expectations for Quest Diagnostics
 DGX.N  and Laboratory Corporation of America  LH.N  into CY23;
adjusting estimates to levels below current Wall Street
consensus starting Q3 2022
    ** Cuts PT on LH to $260 from $310 on softened valuations
for contract research organizations and lower revenue and
earnings forecast for both 2022 and 2023
    ** Jefferies does not expect meaningful EPS upside surprises
in the near future for DGX; expects that stock upside over next
12 months is likely limited
    ** However, brokerage says DGX and LH stand to gain market
share from insurer-driven efforts to narrow lab networks
    ** Also anticipates modest pricing lifts in near-term to 
incrementally offset volume pressure as insurers compensate DGX
and LH for recent cost inflation
    ** As of last close, DGX was down 26% YTD, while LH declined
~31% so far this year
 (Reporting by Raghav Mahobe)
 ((Raghav.Mahobe@thomsonreuters.com;))