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Quest Diagnostics (DGX) Q4 Revenues Top Estimates, Margins Down

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Quest Diagnostics Incorporated’s (DGX - Free Report) fourth-quarter 2021 adjusted earnings per share of $3.33 was in line with the Zacks Consensus Estimate. Adjusted earnings, however, declined 25.7% from the year-ago adjusted figure of $4.48.

Certain one-time expenses like the ones related to amortization expenses, and certain restructuring and integration charges were excluded from the quarter’s adjusted figures.

GAAP earnings from continuing operations came in at $3.12 per share, marking a 25.9% decline from the year-ago period.

Full-year EPS was $14.24, up 27.4% from the year-ago number. The metric surpassed the Zacks Consensus Estimate by 2.2%.


Reported revenues in the fourth quarter dropped 8.6% year over year to $2.74 billion. The same, however, beat the consensus estimate by 4.5%.

Full-year revenues were $10.79 billion, reflecting a 14.3% increase from the year-ago period. Revenues also surpassed the Zacks Consensus Estimate by 0.09%.

Quarterly Details

Diagnostic information services revenues in the quarter edged down 8.5% on a year-over-year basis to $2.67 billion.

Volumes (measured by the number of requisitions) improved 1.3% year over year in the fourth quarter (up 0.2% organically). Revenue per requisition, however, dropped 9.8% year over year.


Cost of services during the reported quarter was $1.72 billion, down 0.9% year over year. Gross margin was 37.4%, reflecting a 488-basis point (bps) contraction from the year-ago figure.

Quest Diagnostics Incorporated Price, Consensus and EPS Surprise

Selling, general and administrative expenses increased 3.8% to $464 million in the quarter under review. Adjusted operating margin of 20.5% represented a 690-bp contraction year over year.

Cash, Capital Structure and Solvency

Quest Diagnostics exited 2021 with cash and csh equivalents of $872 million compared with $1.16 billion at the end of 2020. Cumulative net cash provided by operating activities at the end of 2021 was $2.23 billion compared with $2.00 billion in the year-ago period.

Till 2021, the company has repurchased 16 million shares for $2.2 billion. At the end of 2021, the company had $0.7 billion available under its existing share repurchase authorization.

The company has a 5-year annualized dividend growth rate of 7.39%.

2022 Guidance Raised

The company has raised its full-year 2022 guidance.

Full-year net revenues are currently estimated in the range of $9.00-$9.50 billion (up from the earlier projection of at least $8.50 billion). The Zacks Consensus Estimate for the same is pegged at $8.96 billion.

The adjusted EPS guidance is now at the range of $8.65-$9.35 (earlier guided range was $7.40-8.00). The Zacks Consensus Estimate for the metric is pegged at $8.90.

Our Take

Quest Diagnostics reported a year-over-year decline in revenues and adjusted earnings due to lower COVID-19 testing demand during the fourth quarter. As per the company’s preliminary fourth-quarter announcement in January, COVID-19 testing volumes in the fourth quarter, which included around 7.9 million molecular tests and 0.7 million serology tests, declined compared to the year-ago period. The year-over-year contraction in margins is concerning as well.

However, the company posted better-than-expected fourth-quarter revenues and in-line earnings. Quest Diagnostics noted that its base business revenues grew more than 19% year over year, signifying industry-wide recovery. The company has raised its 2022 guidance based on the continued rebound in base business and recent investments expected to accelerate growth.

Zacks Rank & Key Picks

Quest Diagnostics currently carries a Zacks Rank #3 (Hold).

Here are a few medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.

AMN Healthcare Services, Inc. (AMN - Free Report) has an Earnings ESP of +10.29% and a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcare’s long-term earnings growth rate is estimated at 16.2%. AMN’s earnings yield of 6.5% compares favorably with the industry’s 0.9%.

Henry Schein, Inc. (HSIC - Free Report) has an Earnings ESP of +1.94% and a Zacks Rank of 2.

Henry Schein’s long-term earnings growth rate is estimated at 11.8%. HSIC's earnings yield of 6.1% compares favorably with the industry’s 4.3%.

Laboratory Corporation of America Holdings (LH - Free Report) or LabCorp has an Earnings ESP of +9.21% and a Zacks Rank #1.

LabCorp’s long-term earnings growth rate is estimated at 10.6%. LH’s earnings yield of 66.7% compares favorably with the industry’s 4.3%.

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