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COVID Test Demand to Aid Quest Diagnostics (DGX) Q3 Earnings

Quest Diagnostics Incorporated DGX is scheduled to report third-quarter 2021 earnings on Oct 21, before the opening bell.

In the last reported quarter, the company’s earnings of $3.18 outpaced the Zacks Consensus Estimate by 2.9%. Its earnings surpassed estimates in three of the trailing four quarters and missed on one occasion, with the average surprise being 7.5%.

Key Factors to Note

Quest Diagnostics has been benefiting from the two-pronged agenda to accelerate growth and drive operational excellence. Just like other industry participants, the company’s non-COVID base business might have registered a significant sales rebound, as the economy gradually returned to normalcy.

In terms of COVID-19 testing, in the last reported quarter, demand slowed down on mass vaccination drive, resulting in a significant drop in case count, reflecting an industry-wide trend. Nonetheless, from the second half of June, demand stabilized and started to increase modestly, which, Quest Diagnostics believed, was attributable to the emergence of the Delta variant to some extent. Since the middle of July, the company has seen stabilization and a modest increase in PCR volumes. Positivity rates increased in all geographies served by the company’s performing lab in this period.

Quest Diagnostics Incorporated Price and EPS Surprise

Quest Diagnostics Incorporated Price and EPS Surprise

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

This uptrend was maintained through the third quarter. More specifically, in September, Quest Diagnostics noted that starting Jul 22 (its second-quarter earnings release date), COVID-19 molecular testing volumes were stronger than anticipated through the end of August on the Delta variant spike. Taking into account the daily increase in case count through the third quarter, it expects to register strong sequential growth within the COVID-19 diagnostic testing business. In this regard, from Jul 20, 2021 to Sep 28, 2021, the company performed and reported more than 10.7 million COVID-19 molecular diagnostic and antibody serology tests.

In the second quarter, the organic base business exceeded the pre-pandemic comparable level of 2019. With growing contributions from new hospital lab management contracts and people returning to healthcare systems, this trend is expected to have continued through the third quarter. Further, the company is expected to have gained in the third quarter from health plan contracts and tie-ups with hospital health systems. Value-based programs with UnitedHealthcare and Anthem along with a renewed long-standing contractual relationship with one of the largest health plan customers, Aetna, are expected to have contributed to the top line.

In terms of strategic acquisitions, Quest Diagnostics is expected to have secured high returns in the third quarter from acquisitions of Mercy's outreach laboratory services business in Kansas, Mid America Clinical Laboratories in Indiana, and Memorial Hermann Outreach and Blueprint Genetics.

In addition, the company’s flagship laboratory in Clifton, NJ went live on Jan 4, 2021. This highly automated laboratory functioning is also expected to have contributed to its quarterly performance.

Q3 Estimates

For third-quarter 2021, the Zacks Consensus Estimate for total revenues stands at $2.44 billion, indicating a 12.6% dip from the prior-year reported figure. The consensus estimate for earnings is pegged at $2.68, suggesting a year-over-year decline of 37.8%.

Earnings Whispers

Per our proven model, stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a good chance of beating estimates. This is exactly the case as you can see:

Earnings ESP: Quest Diagnostics has an Earnings ESP of +12.10%. 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 #3.

Other Stocks Worth a Look

Here are a few other medical stocks worth considering, as these too have the right combination of elements to beat on earnings this reporting cycle.

Henry Schein, Inc. HSIC has an Earnings ESP of +0.31% and a Zacks Rank of 2. The company is slated to release third-quarter 2021 results on Nov 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher Scientific Inc. TMO has an Earnings ESP of +0.79% and a Zacks Rank of 2, at present. The company is slated to release third-quarter 2021 results on Oct 27.

West Pharmaceutical Services, Inc. WST has an Earnings ESP of +1.93% and is a Zacks #2 Ranked stock. The company is slated to release third-quarter 2021 results on Oct 28.


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Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report

Thermo Fisher Scientific Inc. (TMO): Free Stock Analysis Report

Henry Schein, Inc. (HSIC): Free Stock Analysis Report

West Pharmaceutical Services, Inc. (WST): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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