Laboratory Corp of America LH Buy Cadet Jack

Laboratory Corp of America (LH) -Buy- Cadet: Jack Zippel 11/04/2014

About Lab. Corp • Independent clinical laboratory that specializes in wide ranging diagnostic and testing services • Clients include physicians, hospitals, governmental agencies, pharmaceutical companies • Shares a duopoly position • High level of acquisitions

Management • CEO: David P. King - hired in September 2001 as Senior Vice President, worked way up through various management to CEO (9280996) • COO: James T. Boyle, Jr. - COO and Executive Vice President since October 2009. Served as Senior Vice President of Managed Care since May 2006. (4569217)

Key Numbers • • • Market Cap: 8. 59 B Price: $101. 23 (11/03/14) Morningstar Fair Value Estimate: $127. 00 P/E: 16. 98 (Industry 25. 41) EPS: 5. 96 (Industry 2. 45) Revenue 5 yr CAGR: 5. 2%

A Quick Market History We probably can’t sustain this. . Too fast Hesitation The correction Really good year

Business Model • “Five Pillars” • 1. Deploy capital to investments that enhance our business • 2. Enhance IT capabilities • 3. Improve efficiency • 4. Scientific innovation at appropriate pricing • 5. Develop knowledge services

Expanding Investments • Depth of service: MEDTOX Scientific toxicology and pain management testing • International presence: Orchid Cellmark (UK), Clearstone Central Laboratories (China, Japan, Singapore) • New mentalities: Acquisition of Covance- move from testing to research/ development

IT Capabilites • Lab. Corp Beacon: Analytics • Easier/Faster access test information – Physicians • Easier/Faster appointment scheduling - Public

Improve Efficiency • Ability to lower costs faster than the scheduled cuts in Medicare reimbursement • Propel™ robot - lower the number of employees involved in sorting and running the tests

Scientific Innovation • 2013 - introduced 152 new tests • BRCAssure - identify patients with mutations who are at increased risk for breast, ovarian and other cancers

Performance vs. DGX & ^GSPC

Covance Aquistion • Why some investors aren’t on board ▫ Usually the more similar the acquisition, the more successful ▫ Disconnect? • Why we should be ▫ Contract Research Organizations projected to grow as drug companies outsource ▫ Dip in price creates buying opportunity (Ride the rebound) ▫ CRO gives life to “relatively stagnant” industry

Advantages Going Forward • • Duopoly (but outshine Quest) Cost-competitive advantage Strength in size Increased emphasis on study of genetics

Challenges • Changes to medical industry as a result of new legislature • Quest’s response to Covance acquisition • Need to spark up the industry

Conclusion • • Buying opportunity Well established company Outperforms competitors (EPS) Good Value (PE, Estimates)

Work Cited/References • http: //library. morningstar. com/stock/analystreport? t=LH&region=usa&culture=en-US • http: //finance. yahoo. com/q? s=LH • http: //phx. corporateir. net/phoenix. zhtml? c=84636&p=irol-irhome • http: //stockcharts. com/h-sc/ui • http: //news. investors. com/110314 -724630 -cvdstock-up-lh-down-on-buyoutdeal. htm? ven=yahoocp&src=aurlled&ven=yahoo