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Testing Volume to Aid Quest Diagnostics' (DGX) Q2 Earnings?

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Quest Diagnostics Incorporated (DGX - Free Report) is scheduled to report second-quarter 2020 earnings on Jul 23, before the opening bell.

In the last reported quarter, the company’s earnings of 94 cents exceeded the Zacks Consensus Estimate by 13.25%. In each of the trailing four quarters, its earnings surpassed estimates, the average surprise being 5.58%.

Let’s take a look at how things have shaped up prior to this announcement.

Key Factors

Quest Diagnostics has been benefiting from its two-pronged agenda to accelerate growth and drive operational excellence. However, its business too had suffered like most companies in the industry in the second quarter on implementation of social distancing and shelter-in-place measures to combat the spread of COVID-19.  

On the last earnings call, the company stated that volume declines intensified in April compared to the first-quarter months. However, it also noted visible signs of bottoming out of volume declines through the quarter. According to the company, it had expected this to happen.

In the second quarter, rapid and continuing spread of COVID-19 infections across the nation, particularly in the South, Southwest and West regions, resulted in inflated demand for the company’s coronavirus tests.

Looking at this demand for testing, the company significantly increased daily molecular diagnostic test capacity, which is likely to have boosted second-quarter top line.

However, global supply constraints persisted in the second quarter. Despite surging demand in the United States and globally, this problem is expected to have limited the company’s growth. 

The company considered adding new technology platforms and partners for lab referral program through which it might have been able to forward specimens it received to other laboratories with open capacity.

Preliminary Q2 Results

On Jul 13, the company released preliminary second-quarter 2020 results. Revenues are expected to be around $1.83 billion, indicating 6% decline from the year-ago quarter figure. The preliminary results also indicated an 18% decline in volume, measured by the number of requisitions. Testing volumes in the company's base business (excluding COVID-19 molecular and antibody testing) are expected to be down 34% from the prior-year period.  

Preliminary adjusted EPS for second-quarter 2020 is expected to be between $1.39 and $1.42.

Quest Diagnostics currently carries a Zacks Rank #1 (Strong Buy).

Key Picks

Per our proven model, a stock with a Zacks Rank #1, 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a good chance of beating estimates.

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Integra LifeSciences Holdings Corporation (IART - Free Report) has an Earnings ESP of +20.69% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exact Sciences Corporation (EXAS - Free Report) has an Earnings ESP of +23.14% and a Zacks Rank of 2 at present.

Thermo Fisher Scientific Inc. (TMO - Free Report) has an Earnings ESP of +14.37% and is a Zacks #1 Ranked stock.

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