Quest Diagnostics Inc.DGX , a leading diagnostic testing information service provider is on track with its mergers and acquisitions (M&A) strategy. In keeping with this strategy, the company has recently teamed up with Cape Cod Healthcare (CCHC) to obtain its outreach laboratory service business.
Although the financial terms of the purchase agreement were not disclosed, yet Quest Diagnostics expects to close the deal by Jan 1, 2018, subject to negotiation of definitive agreements related to transaction as well as customary closing conditions.
Notably, CCHC provides healthcare services to residents and visitors in Cape Cod. As an outreach laboratory services provider, it delivers local physicians and patients' - inpatient or outpatient care - which is separate from a hospital treatment.
Per the acquisition deal, post termination of this transaction, the diagnostic testing information centre would convert into a full-service, state-of-the-art clinical laboratory for Quest Diagnostics in Marlborough, Mass. Notably, CCHC's hospital-based laboratories and the inpatient-outpatient services are not included in the transaction.
Post closure of this acquisition, the outreach laboratory service business of CCHC is expected to deliver Quest Diagnostics' patient access and convenient laboratory services in this location. Per the company, this is feasible by leveraging on CCHC's huge patient service center network in Cape Cod and a number of clinical laboratory tests, including advanced genetic sequencing tests for cancer, neurological disorders plus other diseases.
The transaction is estimated to be a strategic fit as it would benefit from Quest Diagnostics' scale and expertise to produce more cost-effective testing facilities for patients as well as government and commercial health plans.
Quest Diagnostics' merger and acquisition activity is believed to be a key growth driver, functioning in full swing. Worth noting is the company's recent contract to acquire an outreach operation of PeaceHealth Laboratories, anticipated to close in second quarter. Post the closing, the company is set to execute a professional laboratory services agreement to manage 11 PeaceHealth Laboratories, serving medical centers across three states in Pacific Northwest zone. This move is likely to bolster growth, later in 2017.
Per the company, these tuck-in acquisitions fit well within its M&A guidelines. The takeover plans of Quest Diagnostics are consistent with the company's goal of contributing 1-2% revenue growth annually via accretive acquisitions.
Quest Diagnostics has significantly outperformed the Zacks categorized Medical - Outpatient and Home Healthcare industry with respect to share price movement over the past three months. Per the last share price movement, Quest Diagnostics has improved 10.8% over the past three months in comparison to 5.2% rise of the broader industry.
We are optimistic about its focus on restoring growth through acquisitions and partnerships. Particularly, all hopes are pinned on its agreement with PeaceHealth in the Pacific Northwest as well as the latest Cape Cod Healthcare in Massachusetts.
Zacks Rank & Key Picks
A few top-ranked medical stocks are Align Technology, Inc. ALGN , Inogen, Inc. INGN and Accelerate Diagnostics, Inc. AXDX . Notably, Inogen sports a Zacks Rank #1(Strong Buy), while Align Technology and Accelerate Diagnostics carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Align Technology has an expected long-term adjusted earnings growth of almost 24.1%. The stock added roughly 30.7% over the last three months.
Inogen has a long-term expected earnings growth rate of 17.5%. The stock gained around 19.7% over the last three months.
Accelerate Diagnostics has an expected long-term adjusted earnings growth of 30%. he stock added roughly 17.9% over the last three months.
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