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Evercore ISI Initiates Coverage of Labcorp

NEW YORK – Evercore ISI on Friday initiated coverage of Laboratory Corporation of America with an In Line rating and a price target of $240.

Analyst Elizabeth Anderson said in a note to investors that the bank likes "the resiliency" of the company's business model and its long-term potential but noted uncertainty around the clinical lab's ability to expand margins and its current valuation, which accounts for the In Line rating.

She added that "increased visibility on margin expansion and a more attractive valuation would cause us to become more constructive on shares."

Anderson said the bank sees Labcorp's revenue growing by mid-single digits driven in part by the opportunity for "abundant hospital outreach deals." She noted that its efforts to expand margins through operating leverage and its LaunchPad initiative are likely to be countered by wage inflation, COVID headwinds, and the possibility of future price cuts under the Protecting Access to Medicare Act.

In morning trading on the New York Stock Exchange on Friday, Labcorp shares were essentially flat at $222.84.