Quest Diagnostics DGX recently purchased Allina Health’s select laboratory assets, in line with its strategy to expand through planned acquisitions. The acquisition should help Quest Diagnostics expand its unique and cost-efficient laboratory services in Minneapolis and across Minnesota and western Wisconsin.
Financial terms of the deal were not disclosed.
Likely Trend of DGX Stock Following the News
Following the announcement, shares of the company moved nearly 1.3% north to $156.36 at yesterday’s close. Historically, the company has gained high level of synergies from its various inorganic investments within the laboratory service space. We expect market sentiment on the stock to continue to remain positive around this announcement, too.
Meanwhile, DGX currently has a market capitalization of $17.41 billion. It has an earnings yield of 5.76%, much higher than the industry’s yield of 3.39%. In the last reported quarter, DGX delivered an earnings surprise of 1.73%.
More on Quest Diagnostics' Allina Health Deal
Under the terms of the agreement announced earlier, with the completion of the acquisition, Allina Health’s clinic physicians will now have access to Quest Diagnostics’ laboratory services.
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For investors’ note, Allina Health is a leading non-profit healthcare system. With this transaction, Allina Health can reinvest non-profit resources to support its commitment to providing quality and affordable laboratory services to different communities of people.
Strategic Implications of DGX's Latest Purchase
The acquisition of Allina Health’s select laboratory assets is expected to be strategically aligned with DGX's business as both share common interests like helping a range of communities benefit from quality, innovative and affordable laboratory services.
According to Quest Diagnostics, this latest initiative is part of the company’s strategy to generate growth through accretive laboratory acquisitions.
Industry Prospects in Favor of Quest Diagnostics
Per a Grand View Research report, the global clinical laboratory services market was valued at $233.2 billion in 2023 and is anticipated to witness a CAGR of 3.5% by 2030. Primary factors influencing the market surge include the increasing burden of chronic diseases and the growing demand for early diagnostic tests. Along with these, rapid advancements in data management and sample preparation due to growing volumes of testing samples are expected to uplift market growth during the period.
Given the market potential, the deal is expected to benefit Quest Diagnostics' strategy for continuous growth through gradual laboratory acquisitions.
Quest Diagnostics' Growth Through Acquisitions
Acquisitions play a major role for the company. In addition to reaching out through professional lab services and reference testing, The company mainly focuses on traditional hospital outreach purchases and tuck-in lab deals that are accretive to earnings in the first year.
In August, the company announced the completion of its acquisition of LifeLabs from OMERS. The transaction was valued at approximately $1 billion, including net debt. This acquisition is aimed at enhancing access to diagnostic innovation for patients in North America.
The same month, Quest Diagnostics signed a definitive agreement to acquire select assets of University Hospitals' outreach laboratory services business. The transaction should help the company to broaden its access in Ohio to provide its innovative test menu, network of convenient patient access sites and broad health plan coverage.
Additionally, the company purchased PathAI Diagnostics from PathAI, aiming to increase the adoption of AI and digital pathology for better diagnosis of cancer and other diseases.
DGX Price Comparison
Over the past three months, DGX stock has risen 13.9% compared with the industry’s 9.7% growth.
Zacks Rank of DGX and Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Intuitive Surgical ISRG, TransMedics Group TMDX and Boston Scientific BSX. While Intuitive Surgical and TransMedics currently sport a Zacks Rank #1 (Strong Buy) each, Boston Scientific carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical’s shares have surged 64.8% in the past year. Estimates for the company’s earnings have remained constant at $1.67 per share for 2024 in the past 30 days.
ISRG’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 8.97%. In the last reported quarter, it posted an earnings surprise of 16.34%.
Estimates for TransMedics’ 2024 EPS have moved up 2.5% to $1.23 in the past 30 days. Shares of the company have soared 156.5% in the past year compared with the industry’s 17.5% growth.
TMDX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 287.50%. In the last reported quarter, it delivered an earnings surprise of 66.67%.
Estimates for Boston Scientific’s 2024 EPS have increased 3.4% to $2.40 in the past 60 days. In the past year, shares of BSX have risen 57.6% compared with the industry’s 19.5% growth.
In the last reported quarter, BSX delivered an earnings surprise of 6.90%. Its earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
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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.
