Should You Continue to Hold LH Stock in Your Portfolio?

Labcorp Holdings Inc. LH, or Labcorp, is positioned for growth in the coming quarters, supported by expanding testing capabilities in higher-growth areas that continue to aid revenues. The company is focused on strengthening customer and employee experiences, alongside using technology to drive operational and process efficiencies. It also returns capital to shareholders through its share repurchase program and dividends. Yet, macroeconomic and intense competitive pressures may adversely affect Labcorp’s financial results.

In the past year, this Zacks Rank #3 (Hold) stock has risen 26.1% compared with the 1.5% growth of the industry and a 36% increase of the S&P 500 composite.

The renowned healthcare diagnostics company has a market capitalization of $22.55 billion. Labcorp’s earnings yield of 6.5% is well ahead of the industry’s 3.8% yield. In the trailing four quarters, the company delivered an average earnings surprise of 3.07%.

Let’s delve deeper.

Key Factors Driving LH’s Performance

Targeted Development in High-Growth Areas: Labcorp continues to expand its business in specialty testing areas such as oncology, women’s health, autoimmune disease and neurology, which are expected to grow up to three times faster than other therapeutic areas. The company offers more than 450 oncology tests across cancer types and stages, reflecting its comprehensive and advanced testing capabilities. The integration of Invitae has further expanded its genetic testing reach.

Labcorp’s PGDx elio tissue complete has received IVDR-CE marking, becoming the first and only test in the region cleared for comprehensive solid tumor profiling. The company has also added two new Alzheimer's tests for specialty and primary care settings and is working as a commercial partner to expand access to Geneoscopy’s ColoSense colorectal cancer screening test. Labcorp’s consumer health platform has expanded to offer more than 200 biomarkers in categories like men's and women's health, cancer screenings, sexual health and longevity.

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Focus on Operational Efficiency: In 2025, Labcorp achieved $100-$125 million in annual savings under its LaunchPad business process improvement initiative. AI-powered solutions, such as the Labcorp Test Finder, simplified appointment scheduling and results reporting for consumers. Test Finder is now integrated into Labcorp Diagnostic Assistant, a digital solution embedded within the electronic health record (EHR), and also available through EHR companion platform Labcorp Link. Labcorp also launched eClaim Assist, a next-generation digital platform that streamlines patient claim information updates and responses, reducing time and enhancing efficiency. For the full year, the company expanded the enterprise margin by more than 50 points, with key drivers being strong top-line growth, disciplined expense management and synergies of the LaunchPad initiative.

Solvency, Buybacks and Dividends: Labcorp ended the fourth quarter of 2025 with cash and cash equivalents of $532.3 million and $500.1 million in short-term debt. Long-term debt was $5.08 billion, almost consistent with the third-quarter levels. The company had a times interest earned ratio of 5.9%, sequentially up by 0.2%. Labcorp paid $59.3 million in dividends and bought back $225 million of stock during the quarter.

What’s Hurting Labcorp?

Macroeconomic Risks: Labcorp’s operations are heavily dependent on the 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 tensions and retaliatory tariffs is putting pressure on the supply chain and services, increasing the prices of offerings. In the fourth quarter of 2025, the cost of revenues went up 3.8% year over year.

Competitive Landscape: The commercial laboratory business is fiercely competitive in terms of price, service, specialty offerings, and the type and number of commercial laboratories. Both of Labcorp’s segments compete with a broad mix of businesses, in-house departments of pharmaceutical, biotechnology, medical device and diagnostic companies, along with select academic research centers, universities and teaching hospitals. The BLS segment also faces periods of increased price competition, which can weigh on margins and overall profitability.

LH Stock Estimate Trend

Going by the Zacks Consensus Estimate, Labcorp’s 2026 earnings per share (EPS) are expected to grow 7.5% to $17.67. In the past 60 days, the estimate has moved up 0.4%.

The Zacks Consensus Estimate for 2026 revenues is pegged at $14.67 billion, implying 5.2% growth compared to last year.

Top MedTech Stocks

Some better-ranked stocks in the broader medical space are Globus Medical GMED, Phibro Animal Health PAHC and IDEXX Laboratories IDXX.

Globus Medical has an earnings yield of 5.1% compared to the industry’s negative 1.8% yield. Its earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 18.8%. The company’s shares have rallied 29.1%, outpacing the industry’s 8.4% rise in the past year.

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

Phibro Animal Health, sporting a Zacks Rank #1 at present, has an earnings yield of 5.5% compared with the industry’s 2.4% yield. Shares of the company have soared 207.2% against the industry’s 13.8% decline. PAHC’s earnings beat estimates in each of the trailing four quarters, the average surprise being 20.2%.

IDEXX Laboratories, carrying a Zacks Rank #2 (Buy), has an earnings yield of 2.6% compared with the industry’s negative 1.8% yield. Shares of the company have surged 60.1% compared with the industry’s 8.4% growth. IDXX’s earnings topped estimates in each of the trailing four quarters, the average surprise being 6.1%.

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Labcorp Holdings Inc. (LH): Free Stock Analysis Report

IDEXX Laboratories, Inc. (IDXX): Free Stock Analysis Report

Globus Medical, Inc. (GMED): Free Stock Analysis Report

Phibro Animal Health Corporation (PAHC): Free Stock Analysis Report

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

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