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Here's Why You Should Invest in Quest Diagnostics (DGX) Stock

Zacks Equity Research

Quest Diagnostics, Inc. DGX is progressing well with its two-point strategy that focuses on restoring growth and driving operational excellence.

In the past three months, the company’s shares have outperformed the industry.  The stock has improved 17.5% compared with the industry’s 4.7% rise and the S&P 500’s 1.3% increase.

This leading provider of commercial laboratory services in North America has a market cap of $13.13 billion. The company has an expected earnings growth rate of 6.70% for the next three to five years.

Courtesy of impressive prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.

Growth Acceleration Strategies Bode Well: Quest Diagnostics is moving ahead with its accelerating-growth strategies. During the first quarter, the company completed the purchase of a clinical laboratory services business of Boyce and Bynum, a provider of diagnostic and clinical laboratory services in the Midwest. Banking on its in-network status with UnitedHealthcare, Horizon Blue Cross Blue Shield of New Jersey and Blue Cross Blue Shield of Georgia, the company has already added 43 million customers. This represents about a billion-dollar opportunity for the company.

Strategy to Drive Operational Excellence on Track: In terms of efforts to ramp up operating efficiency, its Invigorate cost-cutting initiatives have been successful. Recently, the company stated that the construction of its new flagship laboratory in Clifton, NJ is underway.

Extended Partnership with UnitedHealthcare is Impressive: Management seems upbeat about its extended 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. With this, more than 48 million eligible members of UnitedHealth Group are getting in-network access to Quest Diagnostics’ complete portfolio of laboratory services.

Which Way are Estimates Treading?

For the second quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at $1.70, which indicates 2.9% fall from the year-ago quarter’s figure. The same for revenues is pegged at $1.94 billion, calling for year-over-year growth of 1.3% from the prior-year quarter’s number.

The Zacks Consensus Estimate for 2019 earnings is pegged at $6.48, suggesting 2.7% year-over-year growth from the year-ago figure. The same for revenues is pegged at $7.69 billion, suggesting 2.2% rise from the prior-year number.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Cerner Corporation CERN, Penumbra PEN and Bruker Corporation BRKR. While Cerner sports a Zacks Rank #1 (Strong Buy), Penumbra and Bruker carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cerner’s long-term earnings growth rate is expected to be 13.5%.

Penumbra’s long-term earnings growth rate is projected at 21.5%.

Bruker’s long-term earnings growth rate is estimated at 11.7%.

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