Is This the Right Time to Add DGX Stock to Your Portfolio?
Quest Diagnostics DGX is gaining momentum across physician, hospital and consumer channels, supported by customer wins, acquisitions and expanded offerings. The company’s expanding advanced diagnostics portfolio is driving double-digit growth across key areas, with further commercialization opportunities ahead. Execution of AI, automation and digital transformation initiatives is supporting Quest Diagnostics’ cost savings and productivity goals. However, the company faces reimbursement uncertainty, cost pressures and elevated debt, which could weigh on margins and financial flexibility.
Over the past year, this Zacks Rank #2 (Buy) stock has rallied 32.6% compared with the industry’s 17.5% growth and the S&P 500 composite’s 15.1% rise.
The renowned provider of diagnostic information services has a market capitalization of $27.20 billion. The company surpassed earnings estimates in each of the trailing four quarters, delivering an average surprise of 5.8%.
Factors Favoring DGX
Growth Momentum in the Base Business: Quest Diagnostics continues to address the needs of physicians, hospitals and consumers through broader access, clinical innovation and integrated service offerings. In the second quarter of 2026, physician channel revenues increased in the high single-digit range, supported by new customer wins, higher business with existing customers and growth in regions where the company expanded health plan access and completed acquisitions. The Fresenius Medical Care collaboration is also broadening Quest Diagnostics’ capabilities in kidney care.
Hospital channel revenues grew at a double-digit rate, primarily from Co-Lab Solutions with Corewell Health. Corewell is expected to add about $250 million to 2026 revenues, and the joint venture laboratory is scheduled to be launched in early 2027. The consumer-testing platform, QuestHealth.com, continued to generate revenue growth, supported by demand for wellness panels and newer services such as thyroid testing. The platform is also attracting consumer, wearable and wellness partners through flexible technology integration.
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Strong Potential of Advanced Diagnostics: Quest Diagnostics is expanding advanced diagnostics across cardiometabolic and endocrine, autoimmune, brain health, oncology and women’s and reproductive health. Several of these areas delivered double-digit revenue growth in the second quarter of 2026. Demand remained elevated for ApoB, Lp(a) and liver fibrosis tests, while the company continued to grow its analyzer solution for autoimmune disorders.
In brain health, the AD-Detect portfolio again produced double-digit growth. In oncology, New York State approved Haystack MRD, allowing commercial expansion across all 50 states. Quest Diagnostics also integrated selected cancer tests with Flatiron Health’s OncoEMR Molecular Profiling Integration platform. A pilot program with American Oncology Network is expected to support a broader rollout to Flatiron’s 4,700 clinicians and other providers later in 2026.
Strategic Imperative to Drive Operational Excellence: Quest Diagnostics’ Invigorate program now targets 3% annual cost savings and productivity improvements. The company is using automation and AI across laboratory and administrative processes to offset labor, benefit and reimbursement pressures while improving service quality. During the second quarter, Quest Diagnostics expanded AI-enabled cervical cancer screening and front-end specimen-processing automation to additional laboratories. It also launched IntelliDraw to guide specimen collection at physician offices and plans to introduce an AI-based supply tool at patient service centers. Project Nova remains a multi-year effort to transform order-to-cash processes, with higher spending expected in the second half of 2026 and the first implementation wave planned for fall 2027.
What Ails DGX?
Unstable Reimbursement and Cost Backdrop: Quest Diagnostics remains exposed to changes in government reimbursement, health policy and payer bargaining power. Management continues to assume a 30-basis-point revenue impact in 2026 from the expiration of enhanced Affordable Care Act exchange subsidies. Exchange requisitions were down about 8%, although higher tests per requisition and payer mix kept related revenues roughly flat through the second quarter. A larger second-half impact remains possible.
Cost inflation also limits margin conversion. Second-quarter cost of services increased 10.9% year over year, while adjusted operating margin declined 40 basis points to 16.5%. Project Nova, the lower-margin Corewell and Fresenius mix and supplemental deferred compensation reduced the quarterly margin by a combined 70 basis points.
Elevated Debt Level: Quest Diagnostics’ leverage remains a concern despite better near-term liquidity. As of June 30, 2026, long-term debt was $5.63 billion, and cash and cash equivalents totaled $626 million. Interest expense was $126 million in the first half. Elevated debt could constrain financial flexibility as the company continues investing in acquisitions, automation and Project Nova.
DGX Stock Estimate Trend
The Zacks Consensus Estimate for Quest Diagnostics’ 2026 earnings per share (EPS) has increased 11.2% to $11.15 in the past 60 days.
The consensus estimate for the company’s 2026 revenues is pegged at $12.01 billion. This suggests 8.9% growth from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Veracyte VCYT, Globus Medical GMED and Teleflex TFX.
Veracyte has an earnings yield of 4.7% against the industry’s negative 1.4% yield. Shares of the company have risen 22.3% compared to the industry’s 0.2% growth. VCYT’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 41.8%.
VCYT sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Globus Medical, sporting a Zacks Rank #1, has an earnings yield of 6.7% against the industry’s negative 1.4% yield. Its earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 27.9%. GMED shares have rallied 30.7% compared to the industry’s 0.2% growth over the past year.
Teleflex, carrying a Zacks Rank #2, has an estimated long-term earnings growth rate of 20.7% compared with the industry’s 14.5% growth. Its earnings beat estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 3.2%. TFX shares have gained 1.6% compared with the industry’s 0.2% growth over the past year.
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This article originally published on Zacks Investment Research (zacks.com).
