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Quest Diagnostics (DGX) to Report Q4 Earnings: What's in Store?

Quest Diagnostics Incorporated DGX is slated to report fourth-quarter 2022 earnings on Feb 2, before the opening bell.

In the last reported quarter, the company’s earnings of $2.36 surpassed the Zacks Consensus Estimate by 9.8%. Its earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 5.81%.

Factors at Play

Quest Diagnostics is likely to have benefited from the continued sales rebound in the non-COVID base business as economic activities return to pre-pandemic levels.

In the past few months, the company accelerated growth through health plan access. During the third quarter, the company also ramped up investments to accelerate growth in the base business, particularly in advanced diagnostics and direct-to-consumer testing. The company continues to extend and renegotiate health plan agreements and sees increased volumes and pricing from the contracts. We expect these efforts to have contributed to Quest Diagnostics’ fourth-quarter revenues.

In November 2022, Quest Diagnostics acquired select assets of LabCare Plus — the outreach laboratory services business of Summa Health — a large integrated health system. With the buyout, the company expands access to diagnostic advancement and insights, empowering better health for more communities in Northeastern Ohio. In the same month, Quest Diagnostics unveiled three new fitness panels on questhealth.com, intended for athletes of every kind, from weekend warriors to gold medalists. The new tests offer precise fitness insights and guidance to tangibly enhance performance and help them minimize their vulnerability to injury. These developments might have partially contributed to the company’s top line in the to-be-reported quarter.

Quest Diagnostics Incorporated Price and EPS Surprise

 

Quest Diagnostics Incorporated Price and EPS Surprise
Quest Diagnostics Incorporated Price and EPS Surprise

Quest Diagnostics Incorporated price-eps-surprise | Quest Diagnostics Incorporated Quote

 

Apart from this, during the third quarter, the company made investments to strengthen its capabilities to accelerate growth in oncology and hematology, hereditary genetics, genomic sequencing services and pharma services. In the last reported quarter, Quest Diagnostics launched a new e-commerce platform. The company launched a new ad campaign to drive broader awareness of its consumer-initiated testing offerings, which cover everything from women’s health tests to allergy testing and sexually transmitted infections. These launches are expected to have contributed to the company’s Q4 revenues.

However, the base business is likely to have been impacted by Hurricane Ian and continued inflationary headwinds. To offset the inflationary pressure, Quest Diagnostics has been making several investments to strengthen advanced diagnostics capabilities within the base business and continued to pursue its operational excellence strategy. It has been been closely managing the cost structure through its Invigorate initiatives.

In the to-be-reported quarter, Quest Diagnostics’ COVID-19 testing revenues are expected to have declined year over year, thanks to a robust year-ago comparison. However, on a positive note, as per December 2022 media statement, the company noted that COVID-19 testing volume increased throughout November. To improve testing access amid an increase in COVID-19 and other respiratory illnesses, Quest Diagnostics recently announced that symptomatic individuals may self-collect a nasal specimen for combined COVID-19-influenza molecular testing through approximately 1,600 of our patient service centers in the United States. In addition, Quest continues to partner with the Centers for Disease Control and Prevention (CDC) and the Department of Health and Human Services in the CDC Increasing Community Access to Testing (ICATT) uninsured testing program. The program offers COVID-19 molecular testing through a patient service center network in areas with underserved populations (as defined by the CDC social vulnerability index). This might have provided a favorable boost to the company’s testing sales growth in Q4.

Q4 Estimates

For fourth-quarter 2022, the Zacks Consensus Estimate for total revenues is pegged at $2.25 billion, indicating an 18% decline from the prior-year reported figure. The consensus estimate for earnings is pegged at $1.89, suggesting a year-over-year decline of 43.2%.

What Our Model Suggests

Per our proven model, a stock with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has higher chance of beating estimates. This is not the case, as you can see:

Earnings ESP: Quest Diagnostics has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2.

Stocks Worth a Look

Here are some medical stocks worth considering, as these have the right combination of elements to post an earnings beat this quarter.

Cardinal Health CAH has an Earnings ESP of +5.75% and a Zacks Rank of #2. The company will release fourth-quarter 2022 results on Feb 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cardinal Health has a long-term expected earnings growth rate of 11.7%. Cardinal Health’s earnings yield of 6.87% compares favorably with the industry’s 4.34%.

McKesson Corporation MCK has an Earnings ESP of +0.84% and a Zacks Rank of #2. McKesson is scheduled to release third-quarter fiscal 2023 results on Feb 1.

MCK’s long-term historical earnings growth rate is estimated at 10.1%. MCK’s earnings yield of 6.49% compares favorably with the industry’s 4.34%.

Laboratory Corporation of America Holdings or LabCorp LH currently has an Earnings ESP of +2.67% and a Zacks Rank of #2. LabCorp is expected to release fourth-quarter 2022 results on Feb 9.

LabCorp’s long-term historical earnings growth rate is estimated at 26.1%. LabCorp’s earnings yield of 7.02% compares favorably with the industry’s 4.34%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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Laboratory Corporation of America Holdings (LH) : Free Stock Analysis Report

Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report

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McKesson Corporation (MCK) : Free Stock Analysis Report

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