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Quest Diagnostics to Buy Laboratory Services Unit in Midwest

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In line with its ‘accelerate growth’ strategy, Quest Diagnostics, Inc. (DGX - Free Report) recently announced an agreement to buy assets of the clinical laboratory services business of Boyce and Bynum Pathology Laboratories (“BBPL”). Notably, BBPL is an eminent provider of diagnostic and clinical laboratory services in the Midwest. Subject to customary closing conditions, the buyout is expected to be completed in the first quarter of 2019. However, financial terms of the deal have been kept under wraps.

Quest Diagnostics has also entered into a separate professional services agreement which will be implemented post completion of the buyout. Boyce and Bynum Pathology Professional Services, Inc., the anatomic pathology division of BBPL, will act as a preferred pathology provider in the greater Midwestern region and exclusive pathology provider for Quest Diagnostics customers in Missouri.

M&A Continues to Add Value

Quest Diagnostics is progressing well with regard to its two-point strategy to generate shareholder value — through accelerating growth and driving operational excellence. The growth acceleration strategy consists of five elements. The first one, which focuses on growth of 1-2% through acquisitions, is well on track.

With regard to this, the company recently acquired certain assets of Hurley Medical Center, Hooper Holmes and PhenoPath. Moreover, in a bid to expand in the field of fertility diagnostics, the company took over ReproSource. This apart, Quest Diagnostics’ subsidiary, Summit Health has acquired Provant Health, a provider of employer health and wellness services focused on whole person wellness and care cost management.

The company announced plans to acquire the U.S. laboratory services business of Oxford Immunotec Global PLC. Moreover, Quest Diagnostics came up with a laboratory partnership with Regional Medical Center Health System (RMC).

Management also seems upbeat about the expanded long-term strategic partnership agreement with UnitedHealthcare, a business of UnitedHealth Group, to operate as a preferred national laboratory for all of the company’s members starting Jan 1, 2019.

Share Price Performance

Shares of Quest Diagnostics have underperformed its industry over the past year. The stock has gained 1.4% in comparison to the industry's 5.9% rise. We believe that the latest development will help the stock bounce back.

 

Zacks Rank & Key Picks

Quest Diagnostics currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical space are Integer Holdings Corporation (ITGR - Free Report) , Surmodics, Inc. (SRDX - Free Report) and Veeva Systems (VEEV - Free Report) .

Veeva Systems’ long-term earnings growth rate is estimated at 19.3%. The stock carries a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer Holdings has an expected earnings growth rate of 30.3% for the current year and a Zacks Rank #2 (Buy).

Surmodics’ long-term earnings growth rate is projected at 10%. The stock carries a Zacks Rank of 2 currently.

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