Quest Diagnostics Poised On Solid Q1 Results Despite Woes

On May 22, we issued an updated research report on Quest Diagnostics, Inc. (DGX – Free Report), a major commercial laboratory services provider. The stock currently carries a Zacks Rank #3 (Hold).

Quest Diagnostics has significantly outperformed the Zacks categorized Medical – Outpatient and Home Healthcare industry with respect to share price movement over the past three months. It continues to maintain this bullish trend with solid first-quarter results and a strong 2017 outlook. Per the last share price movement, Quest Diagnostics has gained 10.76% over the same time frame as against 2.73% decline of the broader industry.

The upside was further backed by successful execution of the company’s strategy to grow its esoteric testing and drive profitable growth. Major drivers behind the quarter’s solid earnings performance included two natal genetic carrier screening, prescription drug monitoring, hepatitis C and QuantiFERON TB testing.

In addition, new relationships with hospitals and integrated delivery networks were the other growth drivers. Particularly, the company is positive about its agreement with PeaceHealth in the Pacific Northwest, which is expected to bolster growth, later in 2017.

Late in 2016, Quest Diagnostics came up with renewed and upgraded long-term growth outlook (beyond 2017) based on its new and extended two-point strategy to generate shareholder value, accelerate growth and drive operational excellence.

The company currently expects revenue growth for the period 2017–2020 to be 3–5%. Earnings for the same period are expected to grow faster than revenues in the mid-to-high single digit range. According to the company, its increasing number of partnerships with other health care leaders are creating promising opportunities for top and bottom-line growth while improving the patient experience and reducing the overall cost of care.

After experiencing several quarters of low volume environment, the company has finally started to witness improvement in terms of both volume and pricing. However, sustainability of this improvement is still questionable. Further, reimbursement woes remain.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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