Specialty testing is delivering solid earnings for Bio-Reference Laboratories (BRLI), the third-largest U.S. clinical test outfit. "The good news is likely to continue," says Graham Tanaka, manager of Tanaka Growth Fund (TGFRX) (it owns shares), because of new contracts with UnitedHealth Group (UNH) and other health-care providers, as well as the rise in women's health and cancer diagnostics. Bio-Reference's growing "esoteric" testing covers oncology, genetics, toxicology, and immunology, and brings in 40% of revenues, which were $218 million for the fiscal year ended Apr. 30. "Continued double-digit growth in its core blood testing, plus a 50% leap in cancer diagnostics, should fatten profits," says Tanaka. He sees earnings of $1 a share in 2007, compared with a consensus estimate of 96 cents for the year ending Oct. 31, 2007. For 2008, he sees $1.30, vs. the Street's $1.22. Last year earnings were 84 cents. Arthur Henderson of Jefferies Group (JEF), who rates the stock, now at 27.04, a buy, says Bio-Reference is "well positioned for long-term growth."
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial