Analyst: Future Of Laboratory Corp's Stock Hinges On This

In a report published Tuesday, Jefferies analysts maintained a Hold rating on

, while raising the price target from $108 to $134. The analysts believe that "meaningful stock gains from current levels now hinge on improvements in LH's newly acquired CRO operations." The company's Lab segment remains strong but comps are likely to get tougher as the year progresses. Laboratory Corp continues to witness organic volume growth of over 5 percent for the third consecutive quarter, but has guided to a deceleration from 2Q onwards due to tougher comps. Currency headwinds and a slower conversion rate have exerted pressure on revenue and operation income growth at the company's CRO segment. "We were admittedly cautious on LH's acquisition of CVD and were concerned about that business's recent performance. That said, both mgmt. teams have shown their ability to drive operational improvement quickly (net new orders of $855 MM and a book-to-bill of 1.37were impressive)," the analysts added. Laboratory Corp's future stock valuation is expected to be driven by the company's ability to accelerate CRO revenue growth or continued meaningful margin expansion in its Lab segment. "While we appreciate Covance's globally diverse footprint, it also introduces FX risk/noise to the LH story," the analysts mentioned.