Quest Diagnostics Incorporated’s DGX third-quarter 2024 adjusted earnings per share (EPS) of $2.30 beat the Zacks Consensus Estimate by 1.8%. The metric also exceeded the year-ago adjusted figure by 3.6%.
Certain one-time expenses, like the ones related to amortization expenses, certain restructuring and integration charges, other expenses and excess tax benefits associated with stock-based compensations, were excluded from the quarter’s adjusted figures.
GAAP earnings came in at $1.99 per share, up 1.5% from last year’s comparable figure.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Following the earnings announcement, shares of DGX were up nearly 2% in the pre-market trading today.
DGX’s Q3 in Detail
Revenues reported in the third quarter rose 8.4% year over year to $2.49 billion. The metric surpassed the Zacks Consensus Estimate by 3.4%.
Diagnostic Information Services (DIS) revenues in the quarter were up 8.9% on a year-over-year basis to $2.43 billion. This figure also surpassed our model’s projection of $2.31 billion for the third quarter.
Volumes (measured by the number of requisitions) were up 5.5% year over year in the third quarter. Revenue per requisition increased 3.3% year over year.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote
DGX’s Margin Performance
The cost of services during the reported quarter was $1.68 billion, up 8.8% year over year. The gross profit came in at $811 million, up 7.6% year over year. However, the gross margin was 32.6%, reflecting a 26-basis point (bps) contraction from the year-ago figure.
SG&A expenses were $448 million in the quarter under review, up 17.9% from the third quarter of 2023. The adjusted operating margin of 14.6% represented a 171-bps contraction year over year.
DGX’s Cash, Capital Structure and Solvency
Quest Diagnostics exited the third quarter of 2024 with cash and cash equivalents of $764 million compared with $271 million at the end of the second quarter. The cumulative net cash provided by operating activities at the end of the third quarter of 2024 was $870 million compared with $745 million in the comparable 2023 period.
The company has a five-year annualized dividend growth rate of 7.77%.
DGX Updates 2024 View
Quest Diagnostics provided an updated full-year 2024 guidance. The updated guidance incorporates the impact of recent acquisitions like LifeLabs and the impact of Hurricane Milton, which is expected to reduce net revenues by nearly $15 million and EPS by approximately 8 cents in the fourth quarter.
Revenues for the full year are expected in the $9.80 billion-$9.85 billion band (previously $9.50 billion to $9.58 billion). This represents a year-over-year increase of 5.9%-6.5% (earlier 1.6%-2.5%). The Zacks Consensus Estimate is pegged at $9.63 billion.
Adjusted EPS is expected in the range of $8.85-$8.95 (previously $8.80 to $9.00). The Zacks Consensus Estimate for the metric is pegged at $8.89.
Our Take on DGX
Quest Diagnostics topped both earnings and revenue estimates in the third quarter of 2024. The performance was driven by new customer wins and expanded business with physicians and hospitals. Recent acquisitions, including LifeLabs, also contributed to the growth, leading to an increase in the 2024 revenue outlook. The company is well on track to complete eight acquisitions by this year’s end that meet its criteria for profitability, growth and returns.
Meanwhile, the contraction of both margins in the quarter is discouraging.
DGX’s Zacks Rank & Other Key Picks
Quest Diagnostics currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space are Phibro Animal Health PAHC, Veracyte VCYT and HealthEquity HQY.
Phibro Animal Health reported fourth-quarter fiscal 2024 adjusted earnings of 41 cents per share, which topped the Zacks Consensus Estimate by 20.6%. Revenues of $273.2 million beat the Zacks Consensus Estimate by 4.1%. PAHC sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
PAHC’s fiscal 2025 earnings are expected to surge 31.9% compared with the industry’s 11.6%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 4.1%.
Veracyte, also sporting a Zacks Rank #1, posted second-quarter 2024 earnings of 30 cents per share against the Zacks Consensus Estimate of a loss of 3 cents. Revenues of $114.4 million surpassed the Zacks Consensus Estimate by 14%.
VCYT has an estimated 2024 earnings growth rate of 115.7% compared with the industry’s 13.7%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 328.4%.
HealthEquity, carrying a Zacks Rank #2, reported a second-quarter fiscal 2025 adjusted earnings of 86 cents per share, which surpassed the Zacks Consensus Estimate by 22.9%. Revenues of $299.9 million topped the Zacks Consensus Estimate by 5.4%.
HQY has an estimated long-term earnings growth rate of 28.2% compared with the industry’s 13.4% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 19.8%.
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