Quest Diagnostics' New Acquisitions and Pacts Aid Growth

On Aug 28, 2019, we issued an updated research report on Quest Diagnostics Incorporated DGX. As part of its two-point strategy, the company has been focusing on areas with high potential. However, overall soft industry trends inducing a low volume environment have persistently acted as a dampener for Quest Diagnostics. The stock currently carries a Zacks Rank #3 (Hold).

Shares of Quest Diagnostics have outperformed its industry over the past six months. The stock has rallied 17.1% compared with the 2.9% rise of the industry.

The company exited second-quarter 2019 with better-than-expected earnings as well as revenues. Although Diagnostic information service revenues registered a very nominal increase, two sequential quarters of top-line improvement after an unrelenting decline over the last many quarters can be considered a good sign of recovery amid significant reimbursement pressure.

Quest Diagnostics Incorporated Price

Quest Diagnostics Incorporated Price

Quest Diagnostics Incorporated price | Quest Diagnostics Incorporated Quote

Quest Diagnostics is currently refocusing on diagnostic information services wing and disciplined capital deployment. Its acquisitions and collaborations with hospitals and integrated delivery networks consistently act as major catalysts.

The nine deals closed in 2018 positioned the company to meet its 2019 target. In this regard, earlier this year, it completed the purchase of Boyce and Bynum, a provider of diagnostic and clinical laboratory services in the Midwest. This transaction is likely to garner favorable results through the rest of 2019.

We are also upbeat about Quest Diagnostics’ Preferred Network partnership with UnitedHealthcare. This expanded agreement will provide more than 48 million eligible members with in-network access to the company’s complete portfolio of laboratory services. Under the extended tie-up, both companies will collaborate on a variety of value-based programs.

On the flip side, Quest Diagnostics is currently facing several reimbursement issues. Also, a rise in patient concession along with certain reserve adjustments caused a fall in revenue per requisition. Further, adjusted earnings decreased on a year-over-year basis. This apart, escalating costs and a tough competitive landscape raise concerns.

Stocks Worth a Look

A few better-ranked stocks in the broader medical space are Medtronic MDT, Baxter BAX and NuVasive NUVA, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Medtronic’s long-term earnings growth rate is expected at 7.13%.

Baxter’s long-term earnings growth rate is projected at 12.8%.

NuVasive’s long-term earnings growth rate is estimated to be 12.75%.

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