We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Quest Diagnostics (DGX) to Post Q3 Earnings: What's in Store?
Read MoreHide Full Article
Quest Diagnostics (DGX - Free Report) is set to release third-quarter 2023 results on Oct 24 before the opening bell.
The company posted adjusted earnings per share (EPS) of $2.30 in the last reported quarter, which surpassed the Zacks Consensus Estimate by 3.14%. Quest Diagnostics beat earnings estimates in all the trailing four quarters, the average surprise being 4.92%.
Let’s look at how things have shaped up before this announcement.
Factors at Play
Base Business
We expect Quest Diagnostics to deliver another quarter of robust base business performance, backed by its continuous efforts to partner with health plans, hospitals and physicians. The company has been prioritizing to meet the evolving needs of its core customers, physicians, hospitals and consumers, supporting the nation’s broad-based return to care post the pandemic.
Quest Diagnostics Incorporated Price and EPS Surprise
The Physician Lab Services business is likely to have delivered solid base volume growth in the third quarter of 2023, primarily based on strategic alliances. Several collaborations with health plans, mostly involving value-based arrangements, have expanded services to the market. These value-based contracts are helping Quest Diagnostics become a more strategic partner with health plans, working together on leakage, shared savings and redirection programs.
On the M&A front, Quest Diagnostics’ third-quarter revenues are likely to have benefited from acquisitions, which have been one of the key driving forces of its long-term growth. The New York-Presbyterian deal must have contributed to the company’s stronger base volume trends in the to-be-reported quarter.
Further, DGX’s performance in the third quarter of 2023 is likely to have witnessed the strength of professional laboratory services (PLS) contracts. Of late, Quest Diagnostics has been witnessing growing momentum with a significant pipeline of potential deals with large health systems as hospitals continue to experience financial challenges. We expect the company’s new PLS deals with Northern Light Health, Lee Health and Tower Health to have contributed to base volume growth in the third quarter.
Across the Consumer Health business, the company is likely to have witnessed strong demand for its first consumer-initiated genetics health test — Genetic Insights —launched on questhealth.com during the last reported second quarter. The newest offering for health-minded customers may have aided in optimizing Quest Diagnostics’ base business growth in the third quarter of 2023.
One of the key pillars of the company’s growth strategy is to support faster growth across all customer segments through its highly specialized Advanced Diagnostics offerings. In light of this, the neurology franchise is likely to have witnessed robust growth in the third quarter of 2023 due to the Quest AD-Detect portfolio of Alzheimer's blood tests. The portfolio has strongly positioned DGX to lead in the rapidly evolving Alzheimer's landscape. The test is currently available to all physician customers in the United States and is likely to have generated strong consumer demand in the to-be-reported quarter.
In addition, the cardiometabolic portfolio, endocrinology, infectious disease and carrier and prenatal genetic screening services are likely to have reported strong growth in the third quarter of 2023.
With the acquisition of Haystack Oncology, Quest Diagnostics expects to build on its strengths in cancer screening and diagnosis to play a leading role in the higher growth areas of (minimal residual disease) MRD detection. On the second-quarter earnings call, management noted that the Haystack integration is on track, and the first MRD test is expected to be launched in early 2024.
Further, we are also upbeat about Quest Diagnostics’ progress toward achieving a 3% annual productivity savings target under the Invigorate initiative. The program includes deploying automation and AI to improve quality, efficiency and service.
In the second quarter of 2023, the company implemented an automated microbiology solution in Lenexa, KS. Also, favorable pilot results of the Clifton lab demonstrated AI speed data collection in specimen processing. In genomics, DGX continues to utilize AI in bioinformatics to improve and speed variant classification and prioritization. All these developments are likely to have benefited the company’s top line in the third quarter of 2023.
Our model projects Quest Diagnostics’ Base business revenues in the third quarter to be $2.22 billion, suggesting a 2.2% improvement from the year-ago quarter’s reported figure.
COVID-19 Testing Service
Similar to the last reported second quarter, we assume Quest Diagnostics’ COVID-19 testing revenues are likely to be a significant drag to the top line in the third quarter of 2023. Over the past two quarters, COVID-19 testing revenues continued to nosedive, decreasing 88% in the last quarter. In addition, the lower number of molecular tests must have caused a decline in revenue per requisition.
Following the end of the public health emergency in May, management lowered the COVID-19 testing revenue guidance for the remainder of the year. As communicated on the second-quarter earnings call, revenues for 2023 are expected to be nearly $200 million (which remains at the high end of the previous outlook). Our model also projects $200 million in revenues from this segment for the full year.
Q3 Estimates
For the third quarter of 2023, the Zacks Consensus Estimate for Quest Diagnostics’ revenues is pegged at $2.26 billion, suggesting a decline of 9.3% from the year-ago reported figure.
The Zacks Consensus Estimate for the company’s third-quarter 2023 EPS of $2.19 indicates a 7.2% fall from the year-ago reported figure.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP has a higher chance of beating estimates. However, that is not the case here, as you can see below:
Earnings ESP: Quest Diagnostics has an Earnings ESP of -1.01%. 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 some medical stocks worth considering as these have the right combination of elements to post an earnings beat this time:
LGND’s earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 52.47%. The Zacks Consensus Estimate for Ligand Pharmaceuticals’ third-quarter EPS is expected to increase 65.9% from the year-ago reported figure.
Catalyst Pharmaceuticals (CPRX - Free Report) has an Earnings ESP of +35.54% and a Zacks Rank #2. The company is expected to release third-quarter 2023 results shortly.
CPRX’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 7.17%. The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ third-quarter 2023 EPS is expected to rise 50% from the year-ago reported figure.
Spero Therapeutics (SPRO - Free Report) currently has an Earnings ESP of +60.00% and a Zacks Rank #2. The company is expected to release third-quarter 2023 results shortly.
SPRO’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 72.4%. The Zacks Consensus Estimate for Spero Therapeutics’ fiscal 2023 third-quarter loss per share is expected to be 54.6% narrower from the year-ago reported figure.
Image: Bigstock
Quest Diagnostics (DGX) to Post Q3 Earnings: What's in Store?
Quest Diagnostics (DGX - Free Report) is set to release third-quarter 2023 results on Oct 24 before the opening bell.
The company posted adjusted earnings per share (EPS) of $2.30 in the last reported quarter, which surpassed the Zacks Consensus Estimate by 3.14%. Quest Diagnostics beat earnings estimates in all the trailing four quarters, the average surprise being 4.92%.
Let’s look at how things have shaped up before this announcement.
Factors at Play
Base Business
We expect Quest Diagnostics to deliver another quarter of robust base business performance, backed by its continuous efforts to partner with health plans, hospitals and physicians. The company has been prioritizing to meet the evolving needs of its core customers, physicians, hospitals and consumers, supporting the nation’s broad-based return to care post the pandemic.
Quest Diagnostics Incorporated Price and EPS Surprise
Quest Diagnostics Incorporated price-eps-surprise | Quest Diagnostics Incorporated Quote
The Physician Lab Services business is likely to have delivered solid base volume growth in the third quarter of 2023, primarily based on strategic alliances. Several collaborations with health plans, mostly involving value-based arrangements, have expanded services to the market. These value-based contracts are helping Quest Diagnostics become a more strategic partner with health plans, working together on leakage, shared savings and redirection programs.
On the M&A front, Quest Diagnostics’ third-quarter revenues are likely to have benefited from acquisitions, which have been one of the key driving forces of its long-term growth. The New York-Presbyterian deal must have contributed to the company’s stronger base volume trends in the to-be-reported quarter.
Further, DGX’s performance in the third quarter of 2023 is likely to have witnessed the strength of professional laboratory services (PLS) contracts. Of late, Quest Diagnostics has been witnessing growing momentum with a significant pipeline of potential deals with large health systems as hospitals continue to experience financial challenges. We expect the company’s new PLS deals with Northern Light Health, Lee Health and Tower Health to have contributed to base volume growth in the third quarter.
Across the Consumer Health business, the company is likely to have witnessed strong demand for its first consumer-initiated genetics health test — Genetic Insights —launched on questhealth.com during the last reported second quarter. The newest offering for health-minded customers may have aided in optimizing Quest Diagnostics’ base business growth in the third quarter of 2023.
One of the key pillars of the company’s growth strategy is to support faster growth across all customer segments through its highly specialized Advanced Diagnostics offerings. In light of this, the neurology franchise is likely to have witnessed robust growth in the third quarter of 2023 due to the Quest AD-Detect portfolio of Alzheimer's blood tests. The portfolio has strongly positioned DGX to lead in the rapidly evolving Alzheimer's landscape. The test is currently available to all physician customers in the United States and is likely to have generated strong consumer demand in the to-be-reported quarter.
In addition, the cardiometabolic portfolio, endocrinology, infectious disease and carrier and prenatal genetic screening services are likely to have reported strong growth in the third quarter of 2023.
With the acquisition of Haystack Oncology, Quest Diagnostics expects to build on its strengths in cancer screening and diagnosis to play a leading role in the higher growth areas of (minimal residual disease) MRD detection. On the second-quarter earnings call, management noted that the Haystack integration is on track, and the first MRD test is expected to be launched in early 2024.
Further, we are also upbeat about Quest Diagnostics’ progress toward achieving a 3% annual productivity savings target under the Invigorate initiative. The program includes deploying automation and AI to improve quality, efficiency and service.
In the second quarter of 2023, the company implemented an automated microbiology solution in Lenexa, KS. Also, favorable pilot results of the Clifton lab demonstrated AI speed data collection in specimen processing. In genomics, DGX continues to utilize AI in bioinformatics to improve and speed variant classification and prioritization. All these developments are likely to have benefited the company’s top line in the third quarter of 2023.
Our model projects Quest Diagnostics’ Base business revenues in the third quarter to be $2.22 billion, suggesting a 2.2% improvement from the year-ago quarter’s reported figure.
COVID-19 Testing Service
Similar to the last reported second quarter, we assume Quest Diagnostics’ COVID-19 testing revenues are likely to be a significant drag to the top line in the third quarter of 2023. Over the past two quarters, COVID-19 testing revenues continued to nosedive, decreasing 88% in the last quarter. In addition, the lower number of molecular tests must have caused a decline in revenue per requisition.
Following the end of the public health emergency in May, management lowered the COVID-19 testing revenue guidance for the remainder of the year. As communicated on the second-quarter earnings call, revenues for 2023 are expected to be nearly $200 million (which remains at the high end of the previous outlook). Our model also projects $200 million in revenues from this segment for the full year.
Q3 Estimates
For the third quarter of 2023, the Zacks Consensus Estimate for Quest Diagnostics’ revenues is pegged at $2.26 billion, suggesting a decline of 9.3% from the year-ago reported figure.
The Zacks Consensus Estimate for the company’s third-quarter 2023 EPS of $2.19 indicates a 7.2% fall from the year-ago reported figure.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP has a higher chance of beating estimates. However, that is not the case here, as you can see below:
Earnings ESP: Quest Diagnostics has an Earnings ESP of -1.01%. 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 some medical stocks worth considering as these have the right combination of elements to post an earnings beat this time:
Ligand Pharmaceuticals (LGND - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #1 (Strong Buy). The company is expected to release third-quarter 2023 results soon. You can see the complete list of today’s Zacks #1 Rank stocks here.
LGND’s earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 52.47%. The Zacks Consensus Estimate for Ligand Pharmaceuticals’ third-quarter EPS is expected to increase 65.9% from the year-ago reported figure.
Catalyst Pharmaceuticals (CPRX - Free Report) has an Earnings ESP of +35.54% and a Zacks Rank #2. The company is expected to release third-quarter 2023 results shortly.
CPRX’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 7.17%. The Zacks Consensus Estimate for Catalyst Pharmaceuticals’ third-quarter 2023 EPS is expected to rise 50% from the year-ago reported figure.
Spero Therapeutics (SPRO - Free Report) currently has an Earnings ESP of +60.00% and a Zacks Rank #2. The company is expected to release third-quarter 2023 results shortly.
SPRO’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 72.4%. The Zacks Consensus Estimate for Spero Therapeutics’ fiscal 2023 third-quarter loss per share is expected to be 54.6% narrower from the year-ago reported figure.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.