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Quest Diagnostics (DGX) Down 1.2% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Quest Diagnostics (DGX - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Quest Diagnostics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Quest Diagnostics Posts Earnings Beat, Volume Rises in Q3
Quest Diagnostics’ third-quarter 2020 adjusted earnings per share of $4.31 beat the Zacks Consensus Estimate by 14.9%. Adjusted earnings surged 144.9% from the year-ago number.
Certain one-time expenses like the ones related to the COVID-19 pandemic and their resultant impact of 39 cents; amortization expenses and certain restructuring and integration charges were excluded from the quarter’s adjusted figures.
GAAP earnings from continuing operations came in at $4.14 per share, marking a 165.4% decline from the year-ago quarter.
Reported revenues in the third quarter improved 42.5% year over year to $2.79 billion. The same beat the consensus estimate by 1.17%.
Quarterly Details
Volumes (measured by the number of requisitions) improved 19.7% year over year in the third quarter (up 16.6% organically). Revenue per requisition however improved 20.9% year over year.
Diagnostic information services revenues in the quarter were up 44.3% on a year-over-year basis to $2.71 billion.
Margins
Cost of services during the reported quarter was $1.58 billion, up 25% year over year. Gross margin was 43.3%, reflecting expansion of 791 basis points (bps) from the year-ago figure.
Selling, general and administrative expenses increased 9.4% to $396 million in the quarter under review. Adjusted operating margin of 29.1% represented a 1220-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the third quarter of 2020 with cash and cash equivalents of $1.61 billion compared with $988 million at the end of the second quarter. Cumulative net cash provided by operating activities through the second quarter was $1.46 billion compared with $895 million in the year-ago quarter.
In the three months ended Sep 30, 2020, the company did not repurchase any shares of its common stock. At the end of the third quarter, $1.2 billion remained available under the company's existing share repurchase authorizations. However, Quest Diagnostics has temporarily suspended additional share repurchases under the existing authorization through the end of 2020.
2020 Guidance Updated
The company updated its 2020 projection.
Currently, the company expects to report full-year net revenues in the range of $8.8 billion to $9.1 billion, an expected 13.9% to 17.8% growth from the year-ago reported figure (earlier prediction was $8.4 billion to $8.8 billion, implying 8.7% to 13.9% growth). Full-year adjusted EPS is projected in the range of $9.00 to $10.00 (earlier range was $7.50 to $9.00).
The current Zacks Consensus Estimate for full-year adjusted earnings is pegged at $8.91 while the same for revenues stands at $8.80 billion.
Full-year operating cash flow is expected to be at least $1.75 billion (unchanged). Capital expenditures are expected to be $400 million (compared with the earlier range of $375 million to $400 million).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 21.57% due to these changes.
VGM Scores
Currently, Quest Diagnostics has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Quest Diagnostics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Quest Diagnostics (DGX) Down 1.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Quest Diagnostics (DGX - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Quest Diagnostics due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Quest Diagnostics Posts Earnings Beat, Volume Rises in Q3
Quest Diagnostics’ third-quarter 2020 adjusted earnings per share of $4.31 beat the Zacks Consensus Estimate by 14.9%. Adjusted earnings surged 144.9% from the year-ago number.
Certain one-time expenses like the ones related to the COVID-19 pandemic and their resultant impact of 39 cents; amortization expenses and certain restructuring and integration charges were excluded from the quarter’s adjusted figures.
GAAP earnings from continuing operations came in at $4.14 per share, marking a 165.4% decline from the year-ago quarter.
Reported revenues in the third quarter improved 42.5% year over year to $2.79 billion. The same beat the consensus estimate by 1.17%.
Quarterly Details
Volumes (measured by the number of requisitions) improved 19.7% year over year in the third quarter (up 16.6% organically). Revenue per requisition however improved 20.9% year over year.
Diagnostic information services revenues in the quarter were up 44.3% on a year-over-year basis to $2.71 billion.
Margins
Cost of services during the reported quarter was $1.58 billion, up 25% year over year. Gross margin was 43.3%, reflecting expansion of 791 basis points (bps) from the year-ago figure.
Selling, general and administrative expenses increased 9.4% to $396 million in the quarter under review. Adjusted operating margin of 29.1% represented a 1220-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the third quarter of 2020 with cash and cash equivalents of $1.61 billion compared with $988 million at the end of the second quarter. Cumulative net cash provided by operating activities through the second quarter was $1.46 billion compared with $895 million in the year-ago quarter.
In the three months ended Sep 30, 2020, the company did not repurchase any shares of its common stock. At the end of the third quarter, $1.2 billion remained available under the company's existing share repurchase authorizations. However, Quest Diagnostics has temporarily suspended additional share repurchases under the existing authorization through the end of 2020.
2020 Guidance Updated
The company updated its 2020 projection.
Currently, the company expects to report full-year net revenues in the range of $8.8 billion to $9.1 billion, an expected 13.9% to 17.8% growth from the year-ago reported figure (earlier prediction was $8.4 billion to $8.8 billion, implying 8.7% to 13.9% growth). Full-year adjusted EPS is projected in the range of $9.00 to $10.00 (earlier range was $7.50 to $9.00).
The current Zacks Consensus Estimate for full-year adjusted earnings is pegged at $8.91 while the same for revenues stands at $8.80 billion.
Full-year operating cash flow is expected to be at least $1.75 billion (unchanged). Capital expenditures are expected to be $400 million (compared with the earlier range of $375 million to $400 million).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 21.57% due to these changes.
VGM Scores
Currently, Quest Diagnostics has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Quest Diagnostics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.