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Quest Diagnostics (DGX) Beats on Q3 Earnings, Ups Revenue View
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Quest Diagnostics Incorporated's (DGX - Free Report) third-quarter 2022 adjusted earnings per share of $2.36 beat the Zacks Consensus Estimate by 9.8%. Adjusted earnings, however, plunged 40.4% from the year-ago adjusted figure.
Certain one-time expenses, like the ones related to amortization expenses, and certain restructuring and integration charges, as well as gains and losses on investments, were excluded from the quarter’s adjusted figures.
GAAP earnings came in at $2.17 per share, marking a significant 46% decline from the year-ago reported EPS.
Revenues
Reported revenues in the third quarter dropped 10.4% year over year to $2.49 billion. Revenues, however, exceeded the Zacks Consensus Estimate by 6.4%. While the company’s legacy base business saw a year-over-year improvement, COVID-19 testing revenues dropped significantly in the reported quarter.
Quarterly Details
Base Business (excludes COVID-19 testing) revenues were $2.17 billion in the reported quarter, up 5.1% year over year. COVID-19 testing revenues on the other hand plunged 55.4% in the third quarter to $316 million.
Diagnostic information services revenues in the quarter were down 10.5% on a year-over-year basis to $2.42 billion.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Volumes (measured by the number of requisitions) were down 6.2% year over year in the third quarter (down 6.4% organically). Revenue per requisition dropped 5.1% year over year.
Margins
The cost of services during the reported quarter was $1.62 billion, down 3.1% year over year. However, gross profit dropped 21.4% to $860 million. The gross margin was 34.9%, reflecting a 488-basis point (bp) contraction from the year-ago figure.
Selling, general and administrative expenses rose 8.7% to $464 million in the quarter under review. Adjusted operating margin of 16.3% represented an 815-bp contraction year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the third quarter of 2022 with cash and cash equivalents of $700 million compared with $790 million at the end of the second quarter. Cumulative net cash provided by operating activities at the end of the third quarter was $1.38 billion compared with $1.75 billion in the year-ago period.
In the third quarter, the company repurchased 3.1 million shares for $400 million. In February 2022, Quest Diagnostics’ board of directors increased the size of its share repurchase program by $1 billion. As of Sep 30, 2022, the company had $746 million available under its existing share repurchase authorization.
Banking on consistent improvement in the company’s Base business, Quest Diagnostics has raised its revenue guidance and increased the lower end of the earlier-provided adjusted EPS guidance for the full-year 2022.
Full-year net revenues are currently estimated in the range of $9.72-$9.86 billion (compared with the earlier projection of $9.50-$9.75 billion). The Zacks Consensus Estimate for the same is pegged lower at $9.66 billion.
Adjusted EPS is now expected in the range of $9.75-$9.95 (the earlier guided range was $9.55-$9.95). The Zacks Consensus Estimate for the metric is pegged at $9.67.
Our Take
Quest Diagnostics reported better-than-expected third-quarter earnings and revenues. However, on a year-over-year basis, the company reported a decline on both fronts due to significantly lower COVID-19 testing demand. Margin contraction was a downside too.
The company has ramped up investments to accelerate growth in the base business, particularly in the areas of advanced diagnostics and direct-to-consumer testing.
With a bullish expectation for the remainder of 2022, the company raised its full-year guidance.
Zacks Rank & Stocks to Consider
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
It will release third-quarter 2022 results on Nov 3. Chimerix’s earnings yield of 112.3% compares favorably with the industry’s -2.98%.
McKesson (MCK - Free Report) carries a Zacks Rank #2. It is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.77% compares favorably with the industry’s 5.19%.
Humana (HUM - Free Report) carries a Zacks Rank #2 currently. Humana is slated to release third-quarter 2022 results on Nov 2.
Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5%, in line with the industry.
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Quest Diagnostics (DGX) Beats on Q3 Earnings, Ups Revenue View
Quest Diagnostics Incorporated's (DGX - Free Report) third-quarter 2022 adjusted earnings per share of $2.36 beat the Zacks Consensus Estimate by 9.8%. Adjusted earnings, however, plunged 40.4% from the year-ago adjusted figure.
Certain one-time expenses, like the ones related to amortization expenses, and certain restructuring and integration charges, as well as gains and losses on investments, were excluded from the quarter’s adjusted figures.
GAAP earnings came in at $2.17 per share, marking a significant 46% decline from the year-ago reported EPS.
Revenues
Reported revenues in the third quarter dropped 10.4% year over year to $2.49 billion. Revenues, however, exceeded the Zacks Consensus Estimate by 6.4%. While the company’s legacy base business saw a year-over-year improvement, COVID-19 testing revenues dropped significantly in the reported quarter.
Quarterly Details
Base Business (excludes COVID-19 testing) revenues were $2.17 billion in the reported quarter, up 5.1% year over year. COVID-19 testing revenues on the other hand plunged 55.4% in the third quarter to $316 million.
Diagnostic information services revenues in the quarter were down 10.5% on a year-over-year basis to $2.42 billion.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote
Volumes (measured by the number of requisitions) were down 6.2% year over year in the third quarter (down 6.4% organically). Revenue per requisition dropped 5.1% year over year.
Margins
The cost of services during the reported quarter was $1.62 billion, down 3.1% year over year. However, gross profit dropped 21.4% to $860 million. The gross margin was 34.9%, reflecting a 488-basis point (bp) contraction from the year-ago figure.
Selling, general and administrative expenses rose 8.7% to $464 million in the quarter under review. Adjusted operating margin of 16.3% represented an 815-bp contraction year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the third quarter of 2022 with cash and cash equivalents of $700 million compared with $790 million at the end of the second quarter. Cumulative net cash provided by operating activities at the end of the third quarter was $1.38 billion compared with $1.75 billion in the year-ago period.
In the third quarter, the company repurchased 3.1 million shares for $400 million. In February 2022, Quest Diagnostics’ board of directors increased the size of its share repurchase program by $1 billion. As of Sep 30, 2022, the company had $746 million available under its existing share repurchase authorization.
The company has a five-year annualized dividend growth rate of 7.64%.
2022 Revenue Guidance Raised
Banking on consistent improvement in the company’s Base business, Quest Diagnostics has raised its revenue guidance and increased the lower end of the earlier-provided adjusted EPS guidance for the full-year 2022.
Full-year net revenues are currently estimated in the range of $9.72-$9.86 billion (compared with the earlier projection of $9.50-$9.75 billion). The Zacks Consensus Estimate for the same is pegged lower at $9.66 billion.
Adjusted EPS is now expected in the range of $9.75-$9.95 (the earlier guided range was $9.55-$9.95). The Zacks Consensus Estimate for the metric is pegged at $9.67.
Our Take
Quest Diagnostics reported better-than-expected third-quarter earnings and revenues. However, on a year-over-year basis, the company reported a decline on both fronts due to significantly lower COVID-19 testing demand. Margin contraction was a downside too.
The company has ramped up investments to accelerate growth in the base business, particularly in the areas of advanced diagnostics and direct-to-consumer testing.
With a bullish expectation for the remainder of 2022, the company raised its full-year guidance.
Zacks Rank & Stocks to Consider
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Chimerix (CMRX - Free Report) currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It will release third-quarter 2022 results on Nov 3. Chimerix’s earnings yield of 112.3% compares favorably with the industry’s -2.98%.
McKesson (MCK - Free Report) carries a Zacks Rank #2. It is scheduled to release third-quarter 2022 results on Nov 1.
McKesson’s long-term historical earnings growth rate is estimated at 14.2%. MCK’s earnings yield of 6.77% compares favorably with the industry’s 5.19%.
Humana (HUM - Free Report) carries a Zacks Rank #2 currently. Humana is slated to release third-quarter 2022 results on Nov 2.
Humana’s long-term historical earnings growth rate is estimated at 16.2%. HUM’s earnings yield of 5%, in line with the industry.