The steady recovery from COVID-19 came to a halt in the summer as new cases climbed due to the virus’ Delta variant. Fortunately, cases began declining again from September to October as various guidelines, vaccine and mask mandates were implemented. However, the Centers for Disease Prevention and Control (CDC) indicated that cases had surged 16.1% from the previous week, as of November 18, raising concerns about a winter resurgence, because cold and dry conditions help the virus thrive.
In addition, as people travel back to their hometowns for Thanksgiving, cases have been increasing across the country, with more than 90,000 cases being reported each day and more than 30 states experiencing upticks.
Last month, it was announced that unvaccinated travelers entering the United States would face stricter restrictions, requiring them to produce a document indication they’ve had a recent negative COVID-19 test. So, this mandate should drive the revenues of coronavirus testing companies. Indeed, the global COVID-19 diagnostics market is expected to expand at a 3.1% CAGR between 2021 – 2027.
Given this backdrop, we think it could be wise to bet on coronavirus testing stocks with strong fundamentals—Abbott Laboratories (ABT), Laboratory Corporation of America Holdings (LH), and Quest Diagnostics Incorporated (DGX).
Abbott Laboratories (ABT)
ABT, in Abbott Park, Ill., discovers, develops, manufactures, and sells healthcare products globally. The company falls under the broad segments of Established Pharmaceutical Products; Diagnostic Products; Nutritional Products; and Medical Devices.
On November 16, ABT launched its next-generation infant formula, Similac 360 Total Care, which is designed to provide nutrition for infants. The company is expected to diversify its portfolio further with this product.
On November 12, ABT announced favorable results from its global Leadless II IDE study, which evaluated Aveir leadless pacemaker for patients with erratic heartbeats. The product, if launched, could add significantly to ABT’s revenue.
For its fiscal third quarter, ended September 30, ABT’s net sales increased 23.4% year-over-year to $10.93 billion. Its adjusted earnings and adjusted EPS from continuing operations came in at $2.52 billion and $1.40, respectively, up 43.1% and 42.9% from the same period last year.
A $5.07 consensus EPS estimate for the current year (fiscal 2021) indicates a 38.9% year-over-year increase. Likewise, the $42.16 billion consensus revenue estimate for the current year reflects a 21.8% improvement from the prior year. Furthermore, ABT has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 14.4% in price over the past year and 15.9% year-to-date, to close Friday’s trading session at $126.84.
ABT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ABT has a Stability, Sentiment, and Quality grade of B. In the 199-stock Medical – Pharmaceuticals industry, it is ranked #13. Click here to see the additional POWR Ratings for ABT (Growth, Value, and Momentum).
Laboratory Corporation of America Holdings (LH)
LH is an independent clinical laboratory company that operates worldwide under Labcorp Diagnostics (Dx) and Labcorp Drug Development (DD), offering various tests, such as blood chemistry analyses, urinalysis, blood cell counts, and thyroid tests. LH is headquartered in Burlington, N.C.
On November 18, LH announced that it had agreed to acquire non-clinical test services contract research organization, Toxikon. The acquisition is expected to enhance LH’s productive capability for both drug development and medical device testing.
On November 15, the company declared the expansion of its global offering and extended its footprint in the Asia-Pacific region, with the opening of a laboratory in Singapore. “Singapore serves as a strategic location from which Labcorp can increase accessibility by offering regional and international clients comprehensive support for their bioanalytical studies,” said Dr. Paul Kirchgraber, CEO of Labcorp Drug Development.
LH’s revenues increased 4.3% year-over-year to $4.06 billion in its third fiscal quarter, ended September 30. Its cash and cash equivalent balance for the period came in at $2.04 billion, registering a 205.2% increase from the same period last year. Its adjusted net income per share stood at $6.82.
Analysts expect LH’s EPS to improve 13.8% year-over-year to $27.25 in the current year (fiscal 2021). And the Street expects its revenue to increase 13.7% from the prior year to $15.89 billion. In addition, LH has beaten consensus EPS estimates in each of the trailing four quarters.
LH’s stock has gained 39.8% in price over the past year to close Friday’s trading session at $283.32. It has gained 39.2% year-to-date.
It is no surprise that LH has an overall B rating, which translates to Buy in our POWR Rating system.
LH has an A grade for Sentiment, and a B grade for Value and Quality. It is ranked #5 out of the 54 stocks in the Medical – Diagnostics/Research industry. To see the additional POWR Ratings for Growth, Momentum, and Stability, click here.
Quest Diagnostics Incorporated (DGX)
DGX is a diagnostic testing, information, and other services provider in the United States and globally. The Madison, N.J., company provides patients, clinicians, and hospitals with routine testing, advanced clinical testing, anatomic pathology testing, and other diagnostic information services.
On November 17, DGX declared a $0.62 quarterly dividend per share, payable to shareholders on January 22, 2022. This indicates the company’s ability to pay back its shareholders.
In October, the company announced its new offering of a clinical laboratory testing provision. This new development reflects on its intent to establish value-creating relationships across healthcare.
For the nine months ended September 30, DGX’s net revenues increased 25% year-over-year to $8.04 billion. Its adjusted net income attributable to DGX and adjusted EPS went up 54.7% and 63.1%, respectively, from the same period last year to $1.41 billion and $10.91.
The Street’s $13.80 EPS estimate for the current year (fiscal 2021) reflects a 23.4% year-over-year improvement. Likewise, the Street’s $10.57 billion revenue estimate indicates a 12% rise from the prior year. In addition, DGX has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 18.9% in price over the past year and 24.6% year-to-date, to close Friday’s trading session at $148.44.
DGX’s POWR Ratings reflect this positive outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. DGX has a Value and Quality grade of B. It is ranked #12 in the Medical – Diagnostics/Research industry.
In addition to the POWR Rating grades we have stated above, one can see DGX ratings for Growth, Momentum, Stability, and Sentiment here.
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ABT shares fell $0.01 (-0.01%) in premarket trading Monday. Year-to-date, ABT has gained 17.41%, versus a 27.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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