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Quest Diagnostics Incorporated’s (DGX - Free Report) second-quarter 2020 adjusted earnings per share of $1.42 beat the Zacks Consensus Estimate by a penny. Adjusted earnings however declined 17.9% from the year-ago number.
Certain one-time expenses, like the ones related to the COVID-19 pandemic and their resultant impact including certain income recognized under the Coronavirus Aid, Relief, and Economic Security Act, partially offset by expense associated with a one-time payment to eligible employees to help offset their COVID-19 related expenses; certain asset impairment charges and incremental costs incurred primarily to protect the health and safety of the company's employees and customers, were excluded from the quarter’s adjusted figures.
GAAP earnings from continuing operations came in at $1.36 per share, marking a 34.9% decline from the year-ago quarter.
Reported revenues in the second quarter declined 6.4% year over year to $1.83 billion. The same however beat the consensus estimate by 0.16%.
Quarterly Details
Volumes (measured by the number of requisitions) declined 17.7% year over year in the second quarter (down 18.2% organically). Revenue per requisition however improved 15.3% year over year.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Diagnostic information services revenues in the quarter were down 5.7% on a year-over-year basis to $1.76 billion.
Margins
Cost of services during the reported quarter was $1.22 billion, down 3.5% year over year. Gross margin was 30.8%, reflecting contraction of 445 basis points (bps) from the year-ago figure.
Adjusted operating margin of 10.4% represented a 632-bps contraction year over year. Selling, general and administrative expenses declined 0.6% to $360 million in the quarter under review.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the second quarter of 2020 with cash and cash equivalents of $988 million compared with $342 million at the end of the first quarter. Cumulative net cash provided by operating activities through the second quarter was $602 million compared with $596 million in the year-ago reported quarter.
For the three months ended Mar 31, 2020, the company did not repurchase any shares of its common stock. At the end of the second 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.
However, the company's board of directors remains committed to its quarterly dividend.
2020 Guidance Reinstated
Given the rapidly-changing uncertainties and likely outcomes of coronavirus, Quest Diagnostics had withdrawn its full-year guidance. This time however the company provided its 2020 projection. It reflects a number of assumptions that are subject to change based on uncertainties related to the impact of the COVID-19 pandemic.
Going by the latest guidance, the company expects to report full-year net revenues in the range of $8 billion to $8.6 billion (an expected 3.5% to 11.3% growth from the year-ago reported revenue growth rate). Full-year adjusted EPS is projected in the range of $6.60 to $8.60.
The current Zacks Consensus Estimate for full-year adjusted earnings is pegged at $8.04 while the same for revenues stands at $8.50 billion.
Our Take
Quest Diagnostics reported better-than-expected second-quarter figures. However the year-over-year decline in adjusted earnings and as well as revenues was concerning. Management noted that base testing volume declined year over year because of the pandemic and was partially offset by increased COVID-19 testing. On a positive note, the company expects to continue to expand its COVID-19 testing capacity. It has also re-established its 2020 outlook taking into account the uncertainty caused by the pandemic.
Zacks Rank & Other Key Picks
Quest Diagnostics currently sports a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for ResMed’s fourth-quarter fiscal 2020 revenues is pegged at $710.9 million, suggesting year-over-year improvement of 0.9%. The same for EPS stands at 99 cents, indicating growth of 4.2% from the year-ago reported figure.
The Zacks Consensus Estimate for Exact Sciences’ second-quarter 2020 revenues is $229.6 million, implying 14.9% increase from the year-earlier reported figure.
The Zacks Consensus Estimate for ViewRay’s second-quarter 2020 bottom line stands at a loss of 16 cents per share, suggesting 50% improvement from the year-ago quarter.
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Quest Diagnostics' (DGX) Q2 Earnings Beat, Volume Declines
Quest Diagnostics Incorporated’s (DGX - Free Report) second-quarter 2020 adjusted earnings per share of $1.42 beat the Zacks Consensus Estimate by a penny. Adjusted earnings however declined 17.9% from the year-ago number.
Certain one-time expenses, like the ones related to the COVID-19 pandemic and their resultant impact including certain income recognized under the Coronavirus Aid, Relief, and Economic Security Act, partially offset by expense associated with a one-time payment to eligible employees to help offset their COVID-19 related expenses; certain asset impairment charges and incremental costs incurred primarily to protect the health and safety of the company's employees and customers, were excluded from the quarter’s adjusted figures.
GAAP earnings from continuing operations came in at $1.36 per share, marking a 34.9% decline from the year-ago quarter.
Reported revenues in the second quarter declined 6.4% year over year to $1.83 billion. The same however beat the consensus estimate by 0.16%.
Quarterly Details
Volumes (measured by the number of requisitions) declined 17.7% year over year in the second quarter (down 18.2% organically). Revenue per requisition however improved 15.3% year over year.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote
Diagnostic information services revenues in the quarter were down 5.7% on a year-over-year basis to $1.76 billion.
Margins
Cost of services during the reported quarter was $1.22 billion, down 3.5% year over year. Gross margin was 30.8%, reflecting contraction of 445 basis points (bps) from the year-ago figure.
Adjusted operating margin of 10.4% represented a 632-bps contraction year over year. Selling, general and administrative expenses declined 0.6% to $360 million in the quarter under review.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the second quarter of 2020 with cash and cash equivalents of $988 million compared with $342 million at the end of the first quarter. Cumulative net cash provided by operating activities through the second quarter was $602 million compared with $596 million in the year-ago reported quarter.
For the three months ended Mar 31, 2020, the company did not repurchase any shares of its common stock. At the end of the second 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.
However, the company's board of directors remains committed to its quarterly dividend.
2020 Guidance Reinstated
Given the rapidly-changing uncertainties and likely outcomes of coronavirus, Quest Diagnostics had withdrawn its full-year guidance. This time however the company provided its 2020 projection. It reflects a number of assumptions that are subject to change based on uncertainties related to the impact of the COVID-19 pandemic.
Going by the latest guidance, the company expects to report full-year net revenues in the range of $8 billion to $8.6 billion (an expected 3.5% to 11.3% growth from the year-ago reported revenue growth rate). Full-year adjusted EPS is projected in the range of $6.60 to $8.60.
The current Zacks Consensus Estimate for full-year adjusted earnings is pegged at $8.04 while the same for revenues stands at $8.50 billion.
Our Take
Quest Diagnostics reported better-than-expected second-quarter figures. However the year-over-year decline in adjusted earnings and as well as revenues was concerning. Management noted that base testing volume declined year over year because of the pandemic and was partially offset by increased COVID-19 testing. On a positive note, the company expects to continue to expand its COVID-19 testing capacity. It has also re-established its 2020 outlook taking into account the uncertainty caused by the pandemic.
Zacks Rank & Other Key Picks
Quest Diagnostics currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the broader medical space are ResMed Inc. (RMD - Free Report) , Exact Sciences Corporation (EXAS - Free Report) and ViewRay, Inc. . All the three stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ResMed’s fourth-quarter fiscal 2020 revenues is pegged at $710.9 million, suggesting year-over-year improvement of 0.9%. The same for EPS stands at 99 cents, indicating growth of 4.2% from the year-ago reported figure.
The Zacks Consensus Estimate for Exact Sciences’ second-quarter 2020 revenues is $229.6 million, implying 14.9% increase from the year-earlier reported figure.
The Zacks Consensus Estimate for ViewRay’s second-quarter 2020 bottom line stands at a loss of 16 cents per share, suggesting 50% improvement from the year-ago quarter.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>