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Higher Testing to Aid Quest Diagnostics' (DGX) Q4 Earnings

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Quest Diagnostics Incorporated (DGX - Free Report) is scheduled to report fourth-quarter 2020 earnings on Feb 4, before the opening bell.

In the last reported quarter, the company’s earnings of $4.31 exceeded the Zacks Consensus Estimate by 14.93%. In each of the trailing four quarters, its earnings surpassed estimates, the average surprise being 8.32%.

Key Factors to Note

Quest Diagnostics has been benefiting from its two-pronged agenda to accelerate growth and drive operational excellence. However, like other industry participants, the company’s fourth-quarter performance within its non-COVID base business might have borne some impact of limited social mixing on a regional basis and restricted international trade as a result of the resurgence of COVID-19 through the last two months of the fourth quarter.

During the third-quarter earnings call, the company noted continued demand for COVID-19 testing and recovery of its base testing volumes. The fourth quarter too is expected to have witnessed this trend as healthcare systems gradually resumed non-urgent care and elective surgeries.

Although the company did not make any statement regarding the magnitude of its base testing volume recovery, we expect it to have witnessed a strong rebound in the volume of non-COVID-19 testing with majority of the hospitals reintroducing elective procedures and several physician offices resuming operations through the quarter.

Within non-COVID base business, the company is expected to have secured high return in the fourth quarter from the recently completed acquisitions of Mid America Clinical Laboratories (MACL) in Indiana, Memorial Hermann Outreach and Blueprint Genetics.

Through the fourth quarter, the company made several significant strides in the field of COVID-19 diagnostic testing. Per the company’s media statement released in January, COVID-19 molecular diagnostic testing performed and reported through the three months of the fourth quarter totaled 11.3 million. This compares favorably with the third-quarter’s comparable figure of 10 million. For antibody testing, the same kind of uptrend in testing volume from July to September has been stated by the company. This is a clear indication that Quest Diagnostics is likely to report a strong volume rebound this time around. This, in turn, might have significantly contributed to the company’s top line.

However, global supply constraints persisted in the fourth 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.

Q4 Estimates

For fourth-quarter 2020, the Zacks Consensus Estimate for total revenues stands at $2.91 billion, indicating an improvement of 51.1% from the prior-year reported figure. Also, the consensus estimate for earnings is pegged at $4.09, suggesting year-over-year growth of 144.9%.

Earnings Whispers

Our proven model predicts an earnings beat for Quest Diagnostics this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is exactly the case as you can see below.

Earnings ESP: Quest Diagnostics has an Earnings ESP of +5.07%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks Worth a Look

Here are some other medical stocks also worth considering as these too have the right combination of elements to beat on earnings this reporting cycle.

Patterson Companies, Inc. (PDCO - Free Report) currently has a Zacks Rank #2 and an Earnings ESP of +1.96%. The company is scheduled to report fourth-quarter 2020 earnings on Feb 25.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Teladoc Health, Inc. (TDOC - Free Report) has an Earnings ESP of +31.58% and a Zacks Rank of 2, at present. The company is slated to release fourth-quarter 2020 numbers on Feb 24.

Tenet Healthcare (THC - Free Report) has an Earnings ESP of +7.10% and a Zacks Rank of 1, at present. The company is slated to release fourth-quarter 2020 numbers on Feb 9.

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