Following the divestment of its OralDNA Labs
salivary-diagnostics business to Access Genetics in Dec 2012,
leading diagnostic testing company,
), came up with the plan to sell its HemoCue diagnostic products
business. This business develops point-of-care testing systems.
The company believes that these divestitures will allow it to
refocus its resources toward core diagnostic information
services, drive operational excellence and restore growth.
Accordingly, revenues from the HemoCue and OralDNA products
businesses will now be reported as discontinued operations in its
fourth-quarter and fiscal 2012 results, scheduled to be released
on Wednesday, Jan 23, before the market opens. The company
expects these divestments to reduce its 2012 revenues by $117
million, operating income by $11 million and net income from
continuing operations by $15 million. Consequently, earnings per
share (EPS) are expected to decrease by 9 cents in 2012. The
company expects to incur an asset impairment charge of $89.5
million related to the divestment of HemoCue and OralDNA.
Meanwhile, Quest Diagnostics disclosed the impact of Hurricane
Sandy on its business. According to the company, this catastrophe
was a big blow to its fourth-quarter 2012 performance, reducing
revenues by an estimated $21 million, operating income by $16
million and EPS by 6 cents.
Although we remain concerned with Quest Diagnostics' overall
sales disruption due to Hurricane Sandy, we are optimistic
regarding the company's strategy to refocus on Diagnostic
Information Services along with the organizational structure
developed by the company's new CEO, Steve Rusckowski. We also
expect this to run successfully adding synergies to its ongoing
$500 million restructuring initiative, associated with its
However, pressure on testing volume remains a challenge.
Moreover, reimbursement pressure from the government and other
payers continue. Concerns linger regarding the anticipated
reimbursement cut effective Jan 1, 2013. The competitive
landscape is also tough with the presence of
Laboratory Corporation of America Holdings
). We currently have a Neutral recommendation on Quest
Diagnostics over the long term. The stock retains a Zacks Rank #3
Some of the Zacks Rank #1 (Strong Buy) stocks are
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