Quest Diagnostics (DGX) Q2 Earnings, Revenues Beat Estimates
Quest Diagnostics Incorporated’s DGX second-quarter 2019 adjusted earnings per share (EPS) of $1.73 surpassed the Zacks Consensus Estimate by 2.4%. However, adjusted earnings declined 1.1% from the year-ago number.
Reported EPS came in at $1.51, down 3.8% from the year-ago quarter.
Reported revenues in the second quarter rose 1.8% year over year to $1.95 billion and also beat the consensus estimate by 0.5%.
Quarterly Details
Volumes (measured by the number of requisitions) expanded 4.4% year over year in the second quarter (up 2.9% organically). However, revenue per requisition dropped 2.3%. Diagnostic information services revenues in the quarter were up 2.2% on a year-over-year basis to $1.87 billion.
Cost of services during the reported quarter was $1.27 billion, up 1.8% year over year. Gross margin came in at 35.2%, almost in line with the year-ago figure.
Selling, general and administrative expenses increased 3.1% to $362 million in the quarter under review. Adjusted operating margin came in at 16.7%, suggesting a 24-basis point (bps) contraction year over year.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote
Quest Diagnostics exited the quarter with cash and cash equivalents of $273 million compared with $464 million at the end of the first quarter. Year-to-date net cash provided by operating activities was $596 million in the second quarter of 2019 compared with $503 million a year ago.
In the second quarter, the company repurchased 0.5 million shares of the common stock for $50 million. As of Jun 30, 2019, Quest Diagnostics was left with $0.5 billion of authorization under the approved share buyback plan.
2019 Guidance Intact
Quest Diagnostics has reaffirmed its 2019 outlook. Adjusted EPS for the full year is projected to be more than $6.40. The Zacks Consensus Estimate for the metric is pegged at $6.47.
Revenues for 2019 are estimated in the band of $7.60-$7.75 billion (indicative of roughly 1-3% annualized growth). The current Zacks Consensus Estimate for revenues of $7.69 billion falls within the company’s projected range.
Operating cash flow for 2019 is expected at around $1.3 billion. The estimated range for capital expenditure is maintained at $350-$400 million.
Our Take
We are upbeat about Quest Diagnostics’ expanded network access which has helped the company accelerate volume growth in the second quarter. This strong volume growth combined with its strategy to attain operational excellence has helped the company counter significant reimbursement pressure. The new Preferred Lab Network status within UnitedHealthcare, which represents a multi-year opportunity, buoys optimism.
However, declining revenue per requisition and contraction in operating margin were disappointing.
Zacks Rank & Key Picks
Quest Diagnostics currently carries a Zacks Rank #4 (Sell).
A few better-ranked stocks in the broader medical space are Hologic Inc. HOLX, DENTSPLY SIRONA Inc. XRAY and Teleflex Inc. TFX.
Hologic is scheduled to release second-quarter 2019 results on Jul 31. The Zacks Consensus Estimate for the quarter’s adjusted EPS is pegged at 61 cents and for revenues stands at $834.6 million. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
DENTSPLY SIRONA is scheduled to release second-quarter 2019 results on Aug 2. The Zacks Consensus Estimate for the period’s adjusted EPS is 62 cents and for revenues, $1.03 billion. The stock carries a Zacks Rank #1.
Teleflex is expected to release second-quarter 2019 results on Aug 1. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is $2.59 and for the top line, $636.7 million. The stock has a Zacks Rank of 2 (Buy).
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