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Quest Diagnostics at 52-Week High on Solid Q3 & Prospects

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Share price of Madison, NJ-based Quest Diagnostics, Inc. (DGX - Free Report) reached a new 52-week high of $87.48 on Nov 21, finally closing a bit lower at $87.29. The company gained 27.3% in the past one year, much better than the S&P 500’s 5.4% over the same time frame. It has added roughly 22.7% year to date.
Meanwhile, we note that Quest Diagnostics carries a Zacks Rank #3 (Hold). The stock has a market cap of $12.1 billion.

In the third quarter, Quest Diagnostics posted earnings of $1.37 per share, beating the Zacks Consensus Estimate of $1.35 by 1.48%. The trailing four-quarter average earnings surprise is a positive 0.94%.

QUEST DIAGNOSTC Price and Consensus



The company has a discounted Price/Earnings (PE) ratio of 16.77x compared to the industry’s 17.30x.

Accordingly, the company holds an impressive Value Style Score of B. Our Value Style Score highlights all the vital metrics to focus on value stocks offering high yields. Our research shows that stocks with a Value Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities in the value investing space.

Growth Drivers

Since the robust third-quarter results with respect to both earnings and revenues, Quest Diagnostics witnessed a steady increase in its share price. We note that in the quarter, the company benefitted from the progress in its expanded hospital system relationships. We are looking forward to the company’s recent partnerships with Safeway and HealthOne Systems of HCA Healthcare.

The growth in the quarter can also be attributed to its prescription drug monitoring segment. Management’s unique ability to manage the epidemic of prescription drug abuse with appropriate test utilization has also been appreciated.

We are also looking forward to the company’s plan to expand consumer offering through its recently launched QuestDirect, a new Patient-Initiated Testing service. The facility will allow consumers in Colorado and Missouri to manage health issues by ordering certain lab tests directly without a physician's order. Management believes consumers expect accurate and up-to-date diagnostic information to make proper medical decisions. Thus, the company is currently refocusing on its core diagnostic information services business and working on delivering disciplined capital deployment.

Key Picks

Better-ranked medical stocks are NxStage Medical Inc. (NXTM - Free Report) , Baxter International Inc. (BAX - Free Report) and Bovie Medical Corporation (BVX - Free Report) . NxStage Medical and Baxter International sport a Zacks Rank #1 (Strong Buy) while Bovie Medical carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NxStage Medical surged 30.7% over the last one year compared to the S&P 500’s 5.4% over the same period. The company has a four-quarter average positive earnings surprise of 50.00%.

Baxter International rallied 23.6% over one year, much higher than the S&P 500’s 5.4%. It has a trailing four-quarter average positive earnings surprise of 27%.

Bovie Medical recorded a 130.0% gain in the past one year, way better than the S&P 500’s 5.4%. The company has a trailing four-quarter positive average earnings surprise of 28.7%.

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