Lab Corp. (LH) Trades Strong Amid Positive Mention

Labratory Corp. (NYSE: LH) is ramping following a positive Barron's mention last weekend.

Among other things, LabCorp. could benefit from a shift towards specialty drugs, a Medicare squeeze at hospital labs that could bring in new customers, and a recent acquisition gives LabCorp an in-roads into drug trials.

Shares of LabCorp recently fell last February when the company completed its net $5.7 billion acquisition of Covance. Investors balked at the lack of customer overlap, but management said that LabCorp has a large patient database which will save Covance customers time and money. The two companies can also work together in companion diagnostics.

On Medicate, lab testing accounts for around 2 percent of health-care spending, which means health plans have focused on other areas to trim the fat. In 2017, Medicare will start basing its lab reimbursement on median prices paid by all purchasers. Notably, hospitals are reimbursed 75 percent more than independent labs for similar tests. This could result in more outsourcing to LabCorp.

Shares of LabCorp are up over 1 percent.

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