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Quest Diagnostics (DGX) Base Business Growth Robust, Volume Up
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Quest Diagnostics (DGX - Free Report) has been focusing on areas with high potential. Positive demography and cost reduction initiatives are the other upsides. The stock carries a Zacks Rank #2 (Buy).
In the past year, Quest Diagnostics has outperformed its industry. The stock has gained 7.9% against a 13.4% decline of the industry.
Quest Diagnostics reported better-than-expected fourth-quarter earnings and revenues. During the reported quarter, the base business registered growth. The company also ramped up investments to accelerate growth in the base business, particularly in areas of advanced diagnostics and direct-to-consumer testing.
During the reported quarter, base business revenues were up 8.9%. The company is increasing efforts to drive productivity and expand margins in the base business. The company continues to drive additional productivity improvements with lab platform consolidation and greater use of automation and artificial intelligence. In Q4, within health plans, the company continues to gain traction with value-based contracts. The company has started to benefit from incentives related to these value-based contracts, which help demonstrate the value of these strategic relationships.
In addition, to help offset inflationary pressure, it continues to pursue its operational excellence strategy and has been closely managing the cost structure through the invigorate initiatives.
In terms of Protecting Access to Medicare Act (PAMA), the company is optimistic about the recently introduced federal laboratory legislation called the Saving Access to Laboratory Services Act or SALSA. The company believes that SALSA has the potential to fix PAMA permanently. It would set the Medicare Clinical Lab Fee Schedule back on a sustainable path. If SALSA is not passed, it will result in Medicare cuts over three years, with additional cuts thereafter. Additionally, CMS increased Medicare reimbursement for specimen collection fees for the first time in nearly 40 years. This could provide Quest Diagnostics with a benefit of nearly $35 million to $40 million this year.
On the flip side, in the fourth quarter of 2022, COVID-19 testing revenues nosedived 74.6% to $184 million. Revenues for diagnostic information services declined 15.3% compared to the prior year, reflecting lower revenues from COVID-19 testing services versus the fourth quarter of 2021.
For the quarter, total base testing volumes declined 0.6% from the prior year. The year-over-year decline was primarily related to lower employer drug testing volume and adverse weather events during the quarter.
Total volume, measured by the number of requisitions, was down 11.2% year over year in the fourth quarter. Meanwhile, revenue per requisition declined 5.1% year over year due to lower COVID-19 molecular testing volume.
Selling, general and administrative expenses rose 21.3% in the quarter under review. Adjusted operating margin contracted year over year.
Other Key Picks
Some other top-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 48.7% against the industry’s 0.8% decline over the past year.
Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 28.1% against the industry’s 0.8% decline over the past year.
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Quest Diagnostics (DGX) Base Business Growth Robust, Volume Up
Quest Diagnostics (DGX - Free Report) has been focusing on areas with high potential. Positive demography and cost reduction initiatives are the other upsides. The stock carries a Zacks Rank #2 (Buy).
In the past year, Quest Diagnostics has outperformed its industry. The stock has gained 7.9% against a 13.4% decline of the industry.
Quest Diagnostics reported better-than-expected fourth-quarter earnings and revenues. During the reported quarter, the base business registered growth. The company also ramped up investments to accelerate growth in the base business, particularly in areas of advanced diagnostics and direct-to-consumer testing.
During the reported quarter, base business revenues were up 8.9%. The company is increasing efforts to drive productivity and expand margins in the base business. The company continues to drive additional productivity improvements with lab platform consolidation and greater use of automation and artificial intelligence. In Q4, within health plans, the company continues to gain traction with value-based contracts. The company has started to benefit from incentives related to these value-based contracts, which help demonstrate the value of these strategic relationships.
Quest Diagnostics Incorporated Price
Quest Diagnostics Incorporated price | Quest Diagnostics Incorporated Quote
In addition, to help offset inflationary pressure, it continues to pursue its operational excellence strategy and has been closely managing the cost structure through the invigorate initiatives.
In terms of Protecting Access to Medicare Act (PAMA), the company is optimistic about the recently introduced federal laboratory legislation called the Saving Access to Laboratory Services Act or SALSA. The company believes that SALSA has the potential to fix PAMA permanently. It would set the Medicare Clinical Lab Fee Schedule back on a sustainable path. If SALSA is not passed, it will result in Medicare cuts over three years, with additional cuts thereafter. Additionally, CMS increased Medicare reimbursement for specimen collection fees for the first time in nearly 40 years. This could provide Quest Diagnostics with a benefit of nearly $35 million to $40 million this year.
On the flip side, in the fourth quarter of 2022, COVID-19 testing revenues nosedived 74.6% to $184 million. Revenues for diagnostic information services declined 15.3% compared to the prior year, reflecting lower revenues from COVID-19 testing services versus the fourth quarter of 2021.
For the quarter, total base testing volumes declined 0.6% from the prior year. The year-over-year decline was primarily related to lower employer drug testing volume and adverse weather events during the quarter.
Total volume, measured by the number of requisitions, was down 11.2% year over year in the fourth quarter. Meanwhile, revenue per requisition declined 5.1% year over year due to lower COVID-19 molecular testing volume.
Selling, general and administrative expenses rose 21.3% in the quarter under review. Adjusted operating margin contracted year over year.
Other Key Picks
Some other top-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 48.7% against the industry’s 0.8% decline over the past year.
Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 28.1% against the industry’s 0.8% decline over the past year.