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Quest Diagnostics (DGX) Divests India Business to Strand

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Quest Diagnostics Incorporated (DGX - Free Report) recently closed the previously-announced sale of its India medical diagnostic service business to Strand Life Sciences. Terms of the deal remain undisclosed.

However, the latest development failed to drive Quest Diagnostics’ shares which dipped 0.4% to $81.70 at close, following the announcement.

For investors’ notice, Bengaluru-based Strand Life Sciences is a clinical research and diagnostics company that combines a long track record in bioinformatics with cutting-edge laboratory assays and a vast hospital partner network to drive newer generations of patient care.

How Does Quest Diagnostics Stand to Gain?

The divestiture is likely to help the company streamline its business and focus more on its core U.S. diagnostic testing and laboratories business.

In line with this, last month, the company proposed to build a flagship laboratory in Clifton, NJ, to enhance its diagnostic information services segment within this core business.

This divestiture is likely to further boost its balance sheet which can also aid strategic acquisitions and add to the company’s expansion within core arm.

In this regard, Quest Diagnostics has been on an acquisition spree, lately. The buyouts of assets of the outreach laboratory services operation of Hurley Medical Center, Boyce and Bynum Pathology Laboratories and Provant Health deserve a mention in this regard.

Market Prospects

Going by a report in IBISWorld, the U.S. diagnostic and medical laboratories industry has grown 1.2% to reach revenues of $54 billion in 2018.

A rise in the nation’s aged populace has led to a surge in services like general pathology, clinical pathology, x-ray/radiography imaging and others.

Hence, the latest move is likely to prove beneficial for Quest Diagnostics in the long run.

Price Performance

We believe positive developments such as these are likely to boost the stock which has lost 17.7% compared with the industry’s 16.2% decline over the past year. The current level also compares unfavorably with the S&P 500 index’s 10% decline.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the broader medical space are Veeva Systems Inc. (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and OPKO Health, Inc. (OPK - Free Report) .

Veeva Systems’ long-term earnings growth rate is projected at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer Holdings projects earnings growth rate of 31.2% for the fourth quarter. It currently carries a Zacks Rank #2 (Buy).

OPKO Health’s long-term earnings growth rate is projected at 12%. The stock presently carries a Zacks Rank of 2.

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