Barclays Has 5 Takeaways From Meeting With Laboratory Corp Of America's Management

Barclays said Laboratory Corp. of America Holdings (NYSE: LH) management noted it sees some sustainable tailwinds for volume growth in its lab business, while reimbursement visibility remains good through the end of 2017.

Analysts, including Jack Meehan who had investor meetings with LabCorp management, said Covance integration remains on track, and visibility into the sales funnel remains good.

On capital deployment, LabCorp still sees an attractive pipeline on M&A and noted it will exit the year close to the company's target leverage.

"While paying a dividend is not perceived to be the optimal strategy, there was also an acknowledgement that the current market is rewarding companies with a payout," Meehan wrote in a note.

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On margin improvement, LabCorp highlighted a few areas of opportunity, including the lapping of optical headwinds and sustainable business improvement from LaunchPad.

Last, but not the least, the comments come as the lab industry is still digesting PAMA ahead of some important deadlines over the next year. Signed into law on April 1, 2014, the Protecting Access to Medicare Act of 2014 (PAMA) includes the most extensive reform of the Medicare Clinical Laboratory Fee Schedule (CLFS) since it was established in 1984.

Meehan has an Overweight rating on LabCorp and a price target of $155, which implies a potential upside of 14 percent over Friday's close.

At time of writing, shares of LabCorp were up 1.23 percent on the day at $137.72.

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