RESEARCH TRIANGLE PARK – Labcorp’s stock (LH) took a double-digit hit over the weekend following a big valuation cut from financial services giant Morningstar and ahead of Monday’s formal spinoff of its contract research organization business into the new Fortrea.
“We’ve lowered our fair value estimate on narrow-moat-rated LabCorp LH to $233 per share, down from $271, after adjusting for the spinoff of the drug development business,” Morningstar said in a report by its Debbie Wang.
Here’s how one investment firm defines “narrow moat” vs. “wide moat:”
“A wide moat rating is given to a company that is more likely than not to sustain its competitive advantage for at least the next 20 years, while a narrow moat rating means a company is more likely than not to do so for at least 10 years into the future.”
Labcorp spin offs Fortrea, creating 19,000-employee life science firm based in Durham
Shares in Labcorp, which is based in Burlington, fell to $208.78 from $241.33.
However, shares are up slightly in trading Monday.
But don’t necessarily blame the spinoff for the share drop. Wrote Wang: “[T]he spinoff of the drug development business is immaterial to Labcorp’s narrow economic moat in its diagnostics lab business, in our view.”
Labcorp is now “[u]nshackled from the lower-margin CRO segment,” she added.
