Higher Testing to Aid Quest Diagnostics' (DGX) Q3 Earnings

Quest Diagnostics Incorporated DGX is scheduled to report third-quarter 2020 earnings on Sep 22, before the opening bell.

In the last reported quarter, the company’s earnings of 94 cents exceeded the Zacks Consensus Estimate by 0.71%. In each of the trailing four quarters, its earnings surpassed estimates, the average surprise being 5.17%.

Key Factors to Note

Quest Diagnostics has been benefiting from its two-pronged agenda to accelerate growth and drive operational excellence. However, like other industry participants, the company’s third-quarter performance might have borne the impact of controlled social mixing and near standstill international trade to combat the spread of COVID-19.

During the second-quarter’s earnings call, the company stated about strong volume declines. However, month-wise rebound was also visible reflecting stronger-than-expected recovery in base testing volumes and growing demand for COVID-19 testing services.

Quest Diagnostics Incorporated Price and EPS Surprise

Quest Diagnostics Incorporated Price and EPS Surprise

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

Through the third quarter, the company made several significant strides in the field of COVID-19 diagnostic testing. Per the company’s October-released media statement, COVID-19 molecular diagnostic testing performed and reported through the three months of the third quarter totaled 8.9 million. This compares favorably with the second-quarter’s comparable figure of 5.3 million. For antibody testing, same kind of uptrend in testing volume from July to September has been stated by the company. This is a clear indication that Quest Diagnostics is likely to report a strong volume rebound in the third quarter. This, in turn, might significantly contribute to the company’s top line.

Although the company did not make any statement regarding the magnitude of its base testing volume recovery, we expect a strong rebound in the volume of non-COVID-19 testing as well considering the ongoing market trend in the lab testing space with majority of the hospitals reintroducing elective procedures and several physician offices resuming operations through the quarter.

However, global supply constraints persisted in the third quarter. Despite surging demand in the United States and globally, this problem is expected to have limited the company’s growth.

The company considered adding new technology platforms and partners for lab referral program through which it might have been able to forward specimens it received to other laboratories with open capacity.

Q3 Estimates

For third-quarter 2020, the Zacks Consensus Estimate for total revenues stands at $2.75 billion, indicating an improvement of 40.8% from the prior-year reported figure. Also, the consensus estimate for earnings is pegged at $3.75, suggesting year-over-year growth of 103.1%.

Earnings Whispers

Our proven model conclusively predicts an earnings beat for Quest Diagnostics this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Quest Diagnostics has an Earnings ESP of +3.54%. 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 some other medical stocks also worth considering as these too have the right combination of elements to beat on earnings this reporting cycle.

Humana Inc. HUM currently has a Zacks Rank #2 and an Earnings ESP of +3.35%. The company is scheduled to report third-quarter 2020 earnings on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita Inc. DVA has an Earnings ESP of +2.88% and a Zacks Rank of 1, at present. The company is slated to release third-quarter 2020 numbers on Nov 3.

LHC Group LHCG has an Earnings ESP of +1.85% and a Zacks Rank of 2, at present. The company is slated to release third-quarter 2020 numbers on Nov 4.

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