Quest Diagnostics Incorporated (DGX - Free Report) has been gaining as the company’s base business continues to improve sequentially, signifying industry-wide recovery. The company has raised its 2021 view based on higher-than-anticipated COVID-19 volumes, which buoys optimism. However, market headwinds and stiff competition remain concerns.
In the past year, shares of this Zacks Rank #2 (Buy) company have gained 10.9% against the 50.1% decline of the industry.
The largest provider of commercial laboratory services in North America has a market cap of $16.83 billion. The company surpassed estimates in the trailing three quarters and missed the same in one, the average surprise being 12.25%.
Let us delve deeper.
Base Volume Improves: Quest Diagnostics’ base testing volumes or base business refers to testing volumes, excluding COVID-19 testing. In the third quarter, despite COVID-19 resurgence, the base business registered sequential growth. The company noted that base business volumes rebounded in September following a modest softening in August, partially caused by the rise of the Delta variant and the timing of summer vacations. Base Diagnostic Information Services revenues grew approximately 6% in the third quarter (up nearly 2% excluding acquisitions).
COVID-19 Test Demand Regains: In the third quarter of 2021, COVID-19 testing volumes increased sequentially on a massive spread of the Delta variant throughout summer. This was in line with the broader COVID-19 testing trends across the country. Quest Diagnostics reported approximately 7.6 million molecular tests and nearly 700,000 serology tests in the third quarter. Testing began to increase meaningfully in mid-July and peaked in early-mid September. The positivity rate peaked in mid-August and has steadily been declining across most parts of the country in recent weeks. The company performed an average of 83,000 COVID-19 molecular tests in the third quarter and maintained strong average turnaround times of approximately one day for most specimens throughout the surge.
Upbeat Guidance: After raising its full-year projection in September, Quest Diagnostics further increased the same on its third-quarter earnings call.
Full-year net revenues are currently estimated in the range of $10.45-$10.60 billion, up from the earlier band of $9.84-$10.09 billion, indicating an improvement of 10.7-12.3% (earlier growth expectation was 4.3-6.9%) from 2020. The adjusted earnings per share guidance has been raised to $13.50-$13.90 from the previous projection of $11.65-$12.35.
Downsides
Current Market Headwinds Weigh Heavily on the Stock: The current market environment remains challenging for Quest Diagnostics due to a persistent decline in healthcare utilization rate, softer volume, commercial pricing pressure and reimbursement headwind.
Competitive Landscape: Quest Diagnostics faces intense competition, primarily from Laboratory Corporation of America, other commercial laboratories and hospitals. Hospitals control an estimated 60% of the diagnostic test market compared with Quest Diagnostics’ 15% share.
Estimate Trends
Quest Diagnostics is witnessing a positive estimate revision trend for the current year. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 2.6% north to $14.22.
The Zacks Consensus Estimate for 2021 revenues is pegged at $10.59 billion, suggesting 12.3% growth from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has outperformed its industry over the past year. AMN has gained 27.5% versus the 62.2% industry decline.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.86%. It currently carries a Zacks Rank #2.
Henry Schein has gained 5.2% compared with the industry’s 1.2% rise over the past year.
West Pharmaceutical has a long-term earnings growth rate of 27.6%. West Pharmaceutical surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.
West Pharmaceutical has outperformed its industry over the past year. WST currently carries a Zacks Rank of 2.
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It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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Quest Diagnostics Incorporated (DGX - Free Report) has been gaining as the company’s base business continues to improve sequentially, signifying industry-wide recovery. The company has raised its 2021 view based on higher-than-anticipated COVID-19 volumes, which buoys optimism. However, market headwinds and stiff competition remain concerns.
In the past year, shares of this Zacks Rank #2 (Buy) company have gained 10.9% against the 50.1% decline of the industry.
The largest provider of commercial laboratory services in North America has a market cap of $16.83 billion. The company surpassed estimates in the trailing three quarters and missed the same in one, the average surprise being 12.25%.
Let us delve deeper.
Base Volume Improves: Quest Diagnostics’ base testing volumes or base business refers to testing volumes, excluding COVID-19 testing. In the third quarter, despite COVID-19 resurgence, the base business registered sequential growth. The company noted that base business volumes rebounded in September following a modest softening in August, partially caused by the rise of the Delta variant and the timing of summer vacations. Base Diagnostic Information Services revenues grew approximately 6% in the third quarter (up nearly 2% excluding acquisitions).
COVID-19 Test Demand Regains: In the third quarter of 2021, COVID-19 testing volumes increased sequentially on a massive spread of the Delta variant throughout summer. This was in line with the broader COVID-19 testing trends across the country. Quest Diagnostics reported approximately 7.6 million molecular tests and nearly 700,000 serology tests in the third quarter. Testing began to increase meaningfully in mid-July and peaked in early-mid September. The positivity rate peaked in mid-August and has steadily been declining across most parts of the country in recent weeks. The company performed an average of 83,000 COVID-19 molecular tests in the third quarter and maintained strong average turnaround times of approximately one day for most specimens throughout the surge.
Upbeat Guidance: After raising its full-year projection in September, Quest Diagnostics further increased the same on its third-quarter earnings call.
Full-year net revenues are currently estimated in the range of $10.45-$10.60 billion, up from the earlier band of $9.84-$10.09 billion, indicating an improvement of 10.7-12.3% (earlier growth expectation was 4.3-6.9%) from 2020. The adjusted earnings per share guidance has been raised to $13.50-$13.90 from the previous projection of $11.65-$12.35.
Downsides
Current Market Headwinds Weigh Heavily on the Stock: The current market environment remains challenging for Quest Diagnostics due to a persistent decline in healthcare utilization rate, softer volume, commercial pricing pressure and reimbursement headwind.
Competitive Landscape: Quest Diagnostics faces intense competition, primarily from Laboratory Corporation of America, other commercial laboratories and hospitals. Hospitals control an estimated 60% of the diagnostic test market compared with Quest Diagnostics’ 15% share.
Estimate Trends
Quest Diagnostics is witnessing a positive estimate revision trend for the current year. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 2.6% north to $14.22.
The Zacks Consensus Estimate for 2021 revenues is pegged at $10.59 billion, suggesting 12.3% growth from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks in the broader medical space that investors can consider are AMN Healthcare Services, Inc. (AMN - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and West Pharmaceutical Services, Inc. (WST - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2, has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in the trailing four quarters, delivering a surprise of 19.5%, on average. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has outperformed its industry over the past year. AMN has gained 27.5% versus the 62.2% industry decline.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.86%. It currently carries a Zacks Rank #2.
Henry Schein has gained 5.2% compared with the industry’s 1.2% rise over the past year.
West Pharmaceutical has a long-term earnings growth rate of 27.6%. West Pharmaceutical surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 29.4%.
West Pharmaceutical has outperformed its industry over the past year. WST currently carries a Zacks Rank of 2.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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