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Molecular Tests to Drive Quest Diagnostics (DGX) Q1 Earnings

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Quest Diagnostics Incorporated (DGX - Free Report) is scheduled to report first-quarter 2021 earnings on Apr 22, before the opening bell.

In the last reported quarter, the company’s earnings of $4.67 exceeded the Zacks Consensus Estimate by 14.93%. In each of the trailing four quarters, its earnings surpassed estimates, the average surprise being 8.39%.

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 first-quarter performance within its non-COVID base business might have borne the impact of the emergence of new virus strains and the resurgence of the virus’ next wave.

During the fourth-quarter earnings call, the company noted continued demand for COVID-19 testing and recovery of its base testing volumes (excluding COVID-19 molecular and serology testing volumes) through the summer and fall season. However, the recovery was stalled in December due to the surge in COVID-19 infections across the country. As the first quarter months also witnessed the impact of this resurgence of virus, we expect first-quarter base volume recovery to have been slower than the fourth quarter.

However, within base business, in the first quarter, the company is expected to have made progress on the two-point strategy to accelerate growth and to drive operational excellence. In particular, the company is expected to have secured high return in the first quarter from the recent acquisitions of Mid America Clinical Laboratories in Indiana, Memorial Hermann Outreach and Blueprint Genetics. In terms of strategic partnerships, the PLS partnerships with hospital systems in New York and Indiana as well as the largest PLS relationship to date with Hackensack Meridian Health (completed in December 2020), the largest integrated health network in New Jersey, are expected to have significantly contributed to Quest Diagnostics’ first-quarter top line.

Added to this, the company’s flagship laboratory in Clifton, NJ went live on Jan 4, 2021. This highly automated laboratory functioning too is expected to have contributed to the company’s first-quarter results.

Through the first quarter, the company made several significant strides in the field of COVID-19 diagnostic testing. Per the company’s media statement released in April, COVID-19 molecular diagnostic testing performed and reported through the three months of the first quarter totaled 10.4 million. This is however 0.9 million down from the fourth-quarter’s comparable figure. In terms of antibody testing, the company performed 1 million of tests in the to-be-reported quarter.

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

Q1 Estimates

For first-quarter 2021, the Zacks Consensus Estimate for total revenues stands at $2.69 billion, indicating an improvement of 47.8% from the prior-year reported figure. The consensus estimate for earnings is pegged at $3.78, suggesting year-over-year growth of 302.1%.

Earnings Whispers

Our proven model does not conclusively predict 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. That is not the case as you can see below.

Earnings ESP: Quest Diagnostics has an Earnings ESP of -2.18%. 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.

Stocks Worth a Look

Here are a few medical stocks worth considering as these have the right combination of elements to beat on earnings this reporting cycle.

Elanco Animal Health Incorporated (ELAN - Free Report) currently has a Zacks Rank #2 and an Earnings ESP of +0.73%.  You can see the complete list of today’s Zacks #1 Rank stocks here.

HCA Healthcare, Inc. (HCA - Free Report) has an Earnings ESP of +6.97% and a Zacks Rank of 2, at present.

Avenue Therapeutics, Inc. (ATXI - Free Report) has an Earnings ESP of +16.67% and a Zacks Rank of 2, at present.

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