A Diagnostic Investment

09/22/2006 12:00 am EST

Focus:

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Guru Louis Navellier deems it best to bide his time while Wall Street frets about rates and terrorism. Not yet ready to go on the aggressive, he's also not standing on the sidelines, instead instructing his subscribers to 'go defensive'.


"Despite the terrific earnings environment, Wall Street likes to climb a "wall of worry" over issues such as rising interest rates and terrorist fears. And in this increasingly uncertain environment, I have no choice but to continue to get increasingly defensive. As a result, I am buying a more defensive stock this month.

"Laboratory Corporation of America (LH NYSE) is my new buy and also a top five stock. Known to many in the industry as LabCorp, it is one of the top providers of clinical laboratory services in the world. But LabCorp is not just your routine clinical laboratory. The company performs more than 4,000 types of tests for such clients as hospitals, pharmaceutical firms, physicians, HMOs, government agencies, and employers. Its services range from routine testing, such as urinalyses, HIV tests, and Pap smears, to the most sophisticated molecular diagnostics. LabCorp also offers specialty-testing services, including clinical research, paternity and forensics tests, as well as predictive testing for breast and ovarian cancer.

"LabCorp's second-quarter earnings rose 17.6% to $116.4 million, or 87 cents per share, compared to $106 million, or 74 cents per share, in the same quarter one year earlier. Excluding the impact of accounting changes and a one-time investment loss, the company's operating earnings were actually slightly better by two cents, to 89 cents in the second quarter. Laboratory Corporation's revenues increased 6% to $903.7 million from $853.3 million during the period, due to a 1.8% increase in testing volume and an average 4.1% price increase per test. The company's second quarter results beat Wall Street's consensus earnings estimate of 83 cents per share, but fell short of analysts' consensus estimate of $911 million in sales.

"More importantly, looking forward, Laboratory Corporation now sees 2006 operating earnings, excluding stock-based accounting changes, of $3.28 to $3.33 per share on sales growth of 6.5% to 7.2%. Previously, the company had forecast earnings of $3.05 to $3.15 per share, including a dime of stock-based expense items, on sales of $3.54 billion to $3.57 billion. Analysts are looking for 2006 operating earnings of $3.13 per share, including stock-based compensation charges, on sales of $3.57 billion.

"The stock has been appreciating steadily, and is clearly benefiting from the market's rotation in favor of more conservative, defensive companies. I strongly recommend that you add Laboratory Corporation to your portfolio to help lower volatility and boost your returns in a choppy stock market environment."

 

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