Mizuho comments on DGX and LH post CMS on Monday

Mizuho comments on DGX and LH post CMS on Monday.

The analyst comments "After the close yesterday, the Centers for Medicare and Medicaid Services (CMS) released preliminary Calendar Year (CY) 2027 Clinical Laboratory Fee Schedule (CLFS) payment rates under the Protecting Access to Medicare Act (PAMA), the first repricing since 2018. The average potential change to CY2026 rates is ~16% lower. Cuts are broadly concentrated in esoteric testing while Proprietary Laboratory Analysis is relatively insulated at -2.4%. Final rates are expected to be released in November. We would note that LH's adjusted EPS CAGR of +8.5%-11.5% provided at the 2026 Investor Day includes a PAMA headwind of ~$100mm to the top and bottom line in the first year and significant offsets in the second. For DGX, the company’s low end of its previously provided adjusted EPS target +7-9% assumes PAMA cuts. Importantly, despite this release, we continue to believe there is bi-partisan Congressional support to delay PAMA cuts until there is a legislative fix. As a result, we would not be surprised if PAMA cuts are delayed again for 2027. "

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