Quest Diagnostics: Strong Q1 Outperformance Spurs Buy Rating and Raised Full-Year Guidance

In a report released today, Michael Ryskin from Bank of America Securities maintained a Buy rating on Quest Diagnostics (DGX – Research Report), with a price target of $150.00.

Michael Ryskin has given his Buy rating due to a combination of factors including Quest Diagnostics’ first-quarter performance for the fiscal year 2024, which surpassed expectations in terms of sales and earnings per share (EPS). The company reported revenues of $2.37 billion, which was 3% higher than anticipated, and an EPS of $2.04, outperforming estimates by 10%. This growth was mainly attributed to a 6% year-over-year increase in their base business, exceeding the forecasted 3% growth. Additionally, both revenue per requisition and requisition volumes saw an uptick, further buoying the company’s financial results.
Moreover, the company’s adjusted gross margin came in stronger than both Bank of America’s and the Street’s estimates, suggesting efficient cost management. Quest Diagnostics also experienced high rates of healthcare utilization and growth in new customer segments, particularly in advanced diagnostics. Following these robust results, the company has increased its full-year 2024 sales and adjusted EPS guidance, which now seems conservative in light of the first quarter beat. Ryskin’s confidence is further supported by the company’s favorable valuation and relative resilience to top-line headwinds when compared to peers in the sector.

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Quest Diagnostics (DGX) Company Description:

Quest Diagnostics, Inc. engages in the provision fo diagnostic testing, information and services. It operates through the Diagnostic Information Services (DIS) and All Other segments. The DIS segment offers diagnostic information services to patients, clinicians, hospitals, health plans, and employers. The All Other segment consists of risk assessment services, healthcare information technology, diagnostic products, and clinical trials testing businesses. The company was founded in 1967 and is headquartered in Secaucus, NJ.