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Quest Diagnostics (DGX) Up 8.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Quest Diagnostics (DGX - Free Report) . Shares have added about 8.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Quest Diagnostics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Quest Diagnostics Q3 Earnings Surpass, Gross Margin Down
Quest Diagnostics Incorporated’s third-quarter 2023 adjusted earnings per share of $2.22 beat the Zacks Consensus Estimate by 1.4%. However, adjusted earnings declined 5.9% from the year-ago adjusted figure.
Certain one-time expenses, like the ones related to amortization expenses, particular restructuring and integration charges, other expenses and amortization expenses, were excluded from the quarter’s adjusted figures.
GAAP earnings came in at $1.96 per share, down 9.7% from the year-ago reported figure.
Revenues
Reported revenues in the third quarter declined 7.7% year over year to $2.29 billion. However, revenues exceeded the Zacks Consensus Estimate by 1.7%.
Quarterly Details
Base Business (excludes COVID-19 testing) revenues were $2.27 billion in the reported quarter, up 4.6% year over year. This figure compares with our model’s projection of $2.22 billion for the third quarter.
COVID-19 Testing revenues nosedived 92% in the third quarter to $26 million. The figure exceeded our model’s projected revenues of $20.8 million from this segment in the third quarter of 2023.
Diagnostic Information Services revenues in the quarter were down 7.9% on a year-over-year basis to $2.23 billion. This figure compares with our model’s projection of $2.17 billion for the third quarter.
Volumes (measured by the number of requisitions) were down 0.5% year over year in the second quarter. Revenue per requisition declined 7.2% year over year.
Margins
The cost of services during the reported quarter was $1.54 billion, down 4.8% year over year. The gross profit declined 13.1% to $754 million. The gross margin was 32.9%, reflecting a 206-basis point (bps) contraction from the year-ago figure.
SG&A expenses fell 18.1% to $380 million in the quarter under review. The adjusted operating margin of 16.2% represented a 5-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the third quarter of 2023 with cash and cash equivalents of $143 million compared with $126 million at the end of the second quarter. The cumulative net cash provided by operating activities at the end of the third quarter was $745 million compared with $1.38 billion in the year-ago period.
The company has a five-year annualized dividend growth rate of 7.42%.
Guidance
Quest Diagnostics updated its full-year 2023 guidance.
Full-year net revenue estimates were raised to a new range of $9.19-$9.24 billion (from the earlier band of $9.12-$9.22 billion). The Zacks Consensus Estimate for the same is pegged at $9.16 billion.
Adjusted Earnings per share is now expected in the range of $8.65-$8.75 (narrowed from the $8.50-$8.90 band earlier). The Zacks Consensus Estimate for the metric is pegged at $8.70.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Quest Diagnostics has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Quest Diagnostics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Quest Diagnostics (DGX) Up 8.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Quest Diagnostics (DGX - Free Report) . Shares have added about 8.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Quest Diagnostics due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Quest Diagnostics Q3 Earnings Surpass, Gross Margin Down
Quest Diagnostics Incorporated’s third-quarter 2023 adjusted earnings per share of $2.22 beat the Zacks Consensus Estimate by 1.4%. However, adjusted earnings declined 5.9% from the year-ago adjusted figure.
Certain one-time expenses, like the ones related to amortization expenses, particular restructuring and integration charges, other expenses and amortization expenses, were excluded from the quarter’s adjusted figures.
GAAP earnings came in at $1.96 per share, down 9.7% from the year-ago reported figure.
Revenues
Reported revenues in the third quarter declined 7.7% year over year to $2.29 billion. However, revenues exceeded the Zacks Consensus Estimate by 1.7%.
Quarterly Details
Base Business (excludes COVID-19 testing) revenues were $2.27 billion in the reported quarter, up 4.6% year over year. This figure compares with our model’s projection of $2.22 billion for the third quarter.
COVID-19 Testing revenues nosedived 92% in the third quarter to $26 million. The figure exceeded our model’s projected revenues of $20.8 million from this segment in the third quarter of 2023.
Diagnostic Information Services revenues in the quarter were down 7.9% on a year-over-year basis to $2.23 billion. This figure compares with our model’s projection of $2.17 billion for the third quarter.
Volumes (measured by the number of requisitions) were down 0.5% year over year in the second quarter. Revenue per requisition declined 7.2% year over year.
Margins
The cost of services during the reported quarter was $1.54 billion, down 4.8% year over year. The gross profit declined 13.1% to $754 million. The gross margin was 32.9%, reflecting a 206-basis point (bps) contraction from the year-ago figure.
SG&A expenses fell 18.1% to $380 million in the quarter under review. The adjusted operating margin of 16.2% represented a 5-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the third quarter of 2023 with cash and cash equivalents of $143 million compared with $126 million at the end of the second quarter. The cumulative net cash provided by operating activities at the end of the third quarter was $745 million compared with $1.38 billion in the year-ago period.
The company has a five-year annualized dividend growth rate of 7.42%.
Guidance
Quest Diagnostics updated its full-year 2023 guidance.
Full-year net revenue estimates were raised to a new range of $9.19-$9.24 billion (from the earlier band of $9.12-$9.22 billion). The Zacks Consensus Estimate for the same is pegged at $9.16 billion.
Adjusted Earnings per share is now expected in the range of $8.65-$8.75 (narrowed from the $8.50-$8.90 band earlier). The Zacks Consensus Estimate for the metric is pegged at $8.70.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
At this time, Quest Diagnostics has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Quest Diagnostics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.