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Quest Diagnostics’ (DGX - Free Report) fourth-quarter 2016 adjusted earnings per share (EPS) of $1.31 came in 4 cents or 3.1% ahead of the Zacks Consensus Estimate and exceeded the year-ago number by 10.1%.
Adjusted EPS in the reported quarter excludes charges related to restructuring and integration as well as amortization expenses. Reported EPS in the fourth quarter came in at $1.09, representing a year-over-year plunge of 15.5%.
Full-year adjusted EPS came in at $5.15, an 8% improvement from the year-ago period. The number also exceeded the Zacks Consensus Estimate of $5.10.
Reported revenues for the fourth quarter inched up 0.7% year over year to $1.86 billion, while remaining in line with the Zacks Consensus Estimate. According to the company, the year-over-year improvement came on the back of expanding relationships with hospital health systems and strength in several of the company’s advanced diagnostic offerings.
The company’s 2016 revenues were $7.51 billion, up 0.3% from the year-ago period. However, it missed the Zacks Consensus Estimate of $7.65 billion.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Volume (measured by the number of requisitions) increased 1.5% year over year during the fourth quarter. Revenue per requisition was up 0.4% year over year. Diagnostic information services revenues in the quarter grew 2% on a year-over-year basis.
Among operating expenses, cost of services during the reported quarter was $1.16 billion, up 0.86% year over year. Gross margin came in at 37.7%, a contraction of 14 basis points (bps) year over year.
Selling, general and administrative expenses dropped 6.8% to $400 million in the reported quarter. Adjusted operating margin showed an improvement of 157 bps to 16.2%.
Quest Diagnostics exited the year with cash and cash equivalents of $359 million, which marked a 169.9% surge from the previous year. Full-year net cash provided by operating activities was $1.07 billion compared with $821 million in the year-ago period.
In the fourth quarter, the Board of Directors increased the amount available under the company's existing share repurchase program by $1 billion. As of Dec 31, 2016,Quest Diagnostics was left with $1.4 billion of authorization under the approved share repurchase plan.
Outlook
Quest Diagnostics has provided full-year 2017 guidance. The company currently expects full-year revenues to be within the range of $7.64 billion to $7.72 billion (annualized growth of 2–3%). The current Zacks Consensus Estimate for revenues is pegged at $7.65 billion, close to the lower end of the company’s guided range.
In addition, the company’s 2017 adjusted EPS range has been forecasted as $5.37–$5.52. The Zacks Consensus Estimate of $5.44 remains within this range.
Operating cash flow for 2017 is expected to reach $1.1 billion. The current estimates for capital expenditure remain within the range of $250–$300 million.
Our Take
Quest Diagnostics’ fourth-quarter earnings duly exceeded the Zacks Consensus Estimate while revenues remained in line. The company is currently refocusing on its core diagnostic information services business and working on delivering disciplined capital deployment.
We are also highly optimistic about the company’s focus on continued execution of its five-point strategy. According to Quest Diagnostics, its planned divestiture of the Focus Diagnostics products business is part of this broader strategy to refocus the same on diagnostic information services. In addition, several new relationships with hospitals and integrated delivery networks were the other growth drivers.
However, over the past several quarters, the overall soft industry trends, leading to a low volume environment, have acted as a dampener for the company.
Zacks Rank & Key Picks
Currently, Quest Diagnostics carries a Zacks Rank #2 (Buy).
Some other favorably ranked medical stocks include Cardiovascular Systems, Inc. , Neogen Corp. (NEOG - Free Report) and OraSure Technologies, Inc. (OSUR - Free Report) . While Cardiovascular Systems sports a Zacks Rank #1 (Strong Buy), Neogen and Orasure hold a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardiovascular Systems rallied 200.5% in the past one year, way higher than the S&P 500’s 22.06% gain. It has a positive average earnings surprise of 31.8%.
Neogen gained 27.52% in the past one year, better than the S&P 500 mark. The stock has impressive long-term earnings growth expectations of 16.7% for the next five years compared with the industry average of 15.2%.
OraSure Technologies surged 57.95% in the last one year, compared to the S&P 500. The company has a stellar four-quarter average earnings surprise of over 100%.
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Quest Diagnostics (DGX) Tops Q4 Earnings, Offers '17 View
Quest Diagnostics’ (DGX - Free Report) fourth-quarter 2016 adjusted earnings per share (EPS) of $1.31 came in 4 cents or 3.1% ahead of the Zacks Consensus Estimate and exceeded the year-ago number by 10.1%.
Adjusted EPS in the reported quarter excludes charges related to restructuring and integration as well as amortization expenses. Reported EPS in the fourth quarter came in at $1.09, representing a year-over-year plunge of 15.5%.
Full-year adjusted EPS came in at $5.15, an 8% improvement from the year-ago period. The number also exceeded the Zacks Consensus Estimate of $5.10.
Reported revenues for the fourth quarter inched up 0.7% year over year to $1.86 billion, while remaining in line with the Zacks Consensus Estimate. According to the company, the year-over-year improvement came on the back of expanding relationships with hospital health systems and strength in several of the company’s advanced diagnostic offerings.
The company’s 2016 revenues were $7.51 billion, up 0.3% from the year-ago period. However, it missed the Zacks Consensus Estimate of $7.65 billion.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise | Quest Diagnostics Incorporated Quote
Volume (measured by the number of requisitions) increased 1.5% year over year during the fourth quarter. Revenue per requisition was up 0.4% year over year. Diagnostic information services revenues in the quarter grew 2% on a year-over-year basis.
Among operating expenses, cost of services during the reported quarter was $1.16 billion, up 0.86% year over year. Gross margin came in at 37.7%, a contraction of 14 basis points (bps) year over year.
Selling, general and administrative expenses dropped 6.8% to $400 million in the reported quarter. Adjusted operating margin showed an improvement of 157 bps to 16.2%.
Quest Diagnostics exited the year with cash and cash equivalents of $359 million, which marked a 169.9% surge from the previous year. Full-year net cash provided by operating activities was $1.07 billion compared with $821 million in the year-ago period.
In the fourth quarter, the Board of Directors increased the amount available under the company's existing share repurchase program by $1 billion. As of Dec 31, 2016,Quest Diagnostics was left with $1.4 billion of authorization under the approved share repurchase plan.
Outlook
Quest Diagnostics has provided full-year 2017 guidance. The company currently expects full-year revenues to be within the range of $7.64 billion to $7.72 billion (annualized growth of 2–3%). The current Zacks Consensus Estimate for revenues is pegged at $7.65 billion, close to the lower end of the company’s guided range.
In addition, the company’s 2017 adjusted EPS range has been forecasted as $5.37–$5.52. The Zacks Consensus Estimate of $5.44 remains within this range.
Operating cash flow for 2017 is expected to reach $1.1 billion. The current estimates for capital expenditure remain within the range of $250–$300 million.
Our Take
Quest Diagnostics’ fourth-quarter earnings duly exceeded the Zacks Consensus Estimate while revenues remained in line. The company is currently refocusing on its core diagnostic information services business and working on delivering disciplined capital deployment.
We are also highly optimistic about the company’s focus on continued execution of its five-point strategy. According to Quest Diagnostics, its planned divestiture of the Focus Diagnostics products business is part of this broader strategy to refocus the same on diagnostic information services. In addition, several new relationships with hospitals and integrated delivery networks were the other growth drivers.
However, over the past several quarters, the overall soft industry trends, leading to a low volume environment, have acted as a dampener for the company.
Zacks Rank & Key Picks
Currently, Quest Diagnostics carries a Zacks Rank #2 (Buy).
Some other favorably ranked medical stocks include Cardiovascular Systems, Inc. , Neogen Corp. (NEOG - Free Report) and OraSure Technologies, Inc. (OSUR - Free Report) . While Cardiovascular Systems sports a Zacks Rank #1 (Strong Buy), Neogen and Orasure hold a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardiovascular Systems rallied 200.5% in the past one year, way higher than the S&P 500’s 22.06% gain. It has a positive average earnings surprise of 31.8%.
Neogen gained 27.52% in the past one year, better than the S&P 500 mark. The stock has impressive long-term earnings growth expectations of 16.7% for the next five years compared with the industry average of 15.2%.
OraSure Technologies surged 57.95% in the last one year, compared to the S&P 500. The company has a stellar four-quarter average earnings surprise of over 100%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>