Newsflash: Laboratory Corporation of America Holdings (NYSE:LH) Analysts Have Been Trimming Their Revenue Forecasts

One thing we could say about the analysts on Laboratory Corporation of America Holdings (NYSE:LH) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. This report focused on revenue estimates, and it looks as though the consensus view of the business has become substantially more conservative.

Following the downgrade, the consensus from 14 analysts covering Laboratory Corporation of America Holdings is for revenues of US$13b in 2023, implying an uneasy 11% decline in sales compared to the last 12 months. Statutory earnings per share are presumed to expand 11% to US$12.57. Before this latest update, the analysts had been forecasting revenues of US$15b and earnings per share (EPS) of US$13.09 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a substantial drop in revenue estimates and a small dip in EPS estimates to boot.

Check out our latest analysis for Laboratory Corporation of America Holdings

Analysts made no major changes to their price target of US$267, suggesting the downgrades are not expected to have a long-term impact on Laboratory Corporation of America Holdings' valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Laboratory Corporation of America Holdings, with the most bullish analyst valuing it at US$290 and the most bearish at US$233 per share. With such a narrow range of valuations, analysts apparently share similar views on what they think the business is worth.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 14% by the end of 2023. This indicates a significant reduction from annual growth of 9.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 7.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Laboratory Corporation of America Holdings is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Laboratory Corporation of America Holdings. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Laboratory Corporation of America Holdings' revenues are expected to grow slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Laboratory Corporation of America Holdings going forwards.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. See why we're concerned about Laboratory Corporation of America Holdings' balance sheet by visiting our risks dashboard for free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.