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Quest Diagnostics Rides on Product Launches, Strategic Deals

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On Dec 5, we issued an updated research report on Quest Diagnostics, Inc. (DGX - Free Report) . The stock carries a Zacks Rank #3 (Hold).

Over the past three months, shares of this major commercial laboratory services provider have outperformed its industry. The stock has declined 18% compared with the industry’s 19.9% fall.

We are optimistic about Quest Diagnostics’ consistent efforts to refocus on core diagnostic information services business and disciplined capital deployment. Incidentally, the company has witnessed significant growth through infectious disease testing, prescription drug monitoring and wellness business.

Of late, major developments included the company’s progress in prescription drug monitoring, QuantiFERON and non-invasive prenatal screening. In advanced diagnostics, Quest Diagnostics made a strong improvement with its new center of excellence for precision medicine oncology in Texas. This apart, with the acquisition of Med Fusion, the company has seen accelerated growth in tumor panels.

Quest Diagnostics’ latest acquisitions and collaborations with hospitals and integrated delivery networks (the most recent buyouts on the list being US Laboratory Services business of Oxford Immunotec, Provant Health, Hurley Medical Center's outreach operation in Flint, MI) continue to act as major growth drivers.

We are also upbeat about the company entering into a strategic partnership agreement with UnitedHealthcare to join the latter's network for all plan participants from Jan 1, 2019 onward.

On the flip side, during third-quarter earnings call, Quest Diagnostics has lowered its full-year revenue guidance to reflect lower-than-expected revenue performance in 2018. This is primarily due to two factors. First, the company is currently facing headwinds in the areas of prescription drug monitoring, hepatitis C and vitamin D testing.

While the company has made some progress, the testing areas continued to impact its revenue growth in the third quarter of 2018. Second, in the same period, the company saw a rise in patient concessions, which has also affected its top line.Additionally, the reimbursement scenario persists to be a major cause for concern.

Stocks to Consider

Some 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) .

Integer has an expected earnings growth rate of 31.2% for the fourth quarter and a Zacks Rank #2 (Buy). You can see  the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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

Veeva Systems' long-term earnings growth rate is estimated at 19.3%. The stock is presently a Zacks #2 Ranked player.

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