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Quest Diagnostics (DGX) Q4 Revenues Top, Gross Margin Down
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Quest Diagnostics Incorporated’s (DGX - Free Report) fourth-quarter 2023 adjusted earnings per share (EPS) of $2.15 beat the Zacks Consensus Estimate by 0.5%. The metric also surpassed the year-ago adjusted figure by 8.6%.
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 $1.70 per share compared with 87 cents in the same period last year.
For the full year, adjusted earnings were $8.71 per share, down 12.5% from the year-ago period’s levels. However, the figure came in line with the Zacks Consensus Estimate.
Revenues
Revenues reported in the fourth quarter declined 1.9% year over year to $2.29 billion. However, revenues exceeded the Zacks Consensus Estimate by 1.8%.
Total revenues for 2023 were $9.25 billion, reflecting a 6.4% fall from the year-ago period. The figure beat the Zacks Consensus Estimate by 0.5%.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Base Business (excludes COVID-19 testing) revenues were $2.25 billion in the reported quarter, up 4.7% year over year. This figure compares with our model’s projection of $2.22 billion for the fourth quarter.
COVID-19 Testing revenues nosedived 79.9% in the fourth quarter to $37 million. However, the figure still exceeded our model’s projected revenues of $14 million from this segment in the fourth quarter of 2023.
Diagnostic Information Services revenues in the quarter were down 1.9% on a year-over-year basis to $2.22 billion. This figure compares with our model’s projection of $2.16 billion for the fourth quarter.
Volumes (measured by the number of requisitions) were up 1.9% year over year in the fourth quarter. Revenue per requisition declined 3.5% year over year.
Margins
The cost of services during the reported quarter was $1.55 billion, down 1.5% year over year. The gross profit declined 2.9% to $736 million. The gross margin was 32.2%, reflecting a 32-basis point (bps) contraction from the year-ago figure.
SG&A expenses fell 27.7% to $407 million in the quarter under review. The adjusted operating margin of 14.4% represented a 602-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited 2023 with cash and cash equivalents of $686 million compared with $315 million at the end of 2022. The cumulative net cash provided by operating activities at the end of 2023 was $1.27 billion compared with $1.72 billion at the end of 2022.
Quest Diagnostics initiated its full-year 2024 guidance.
Revenues for the full year are expected within the $9.35-$9.45 billion band. The Zacks Consensus Estimate is pegged at $9.38 billion.
Adjusted EPS is expected in the range of $8.60-$8.90. The Zacks Consensus Estimate for the metric is pegged at $8.96.
Our Take
Quest Diagnostics reported better-than-expected earnings and revenues in the fourth quarter of 2023. The company advanced its growth strategy with innovative testing solutions, new and expanded relationships with health systems and a robust pipeline of M&A and professional lab services opportunities. During the quarter, Quest Diagnostics strengthened its oncology offering with a strategic investment in higher growth minimal residual disease testing.
Robust revenue growth in several clinical areas, including advanced cardiometabolic, prenatal and hereditary genetics, and neurology is highly promising. Further, the expansion of the operating margin bodes well for the stock.
Meanwhile, fourth-quarter revenues were down year over year. The contraction of the gross margin raises apprehension.
Zacks Rank and Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Haemonetics (HAE - Free Report) and McKesson (MCK - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 10.9% for 2025. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Haemonetics, carrying a Zacks Rank #2, reported a second-quarter fiscal 2024 adjusted EPS of 99 cents, which beat the Zacks Consensus Estimate by 5.3%. For the third quarter, revenues are expected to increase 5.6% year over year.
HAE has an estimated fiscal 2024 earnings growth rate of 28.4% compared with the industry’s 17.3% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 16.1%.
Mckesson reported a third-quarter fiscal 2023 adjusted earnings of $6.90, which beat the Zacks Consensus Estimate by 8.8%. For the fourth quarter, revenues are expected to increase 9.9% year over year. It currently carries a Zacks Rank #2.
MCK has an estimated earnings growth rate of 14% for fiscal 2025 compared with the industry’s 13.5% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.9%.
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Quest Diagnostics (DGX) Q4 Revenues Top, Gross Margin Down
Quest Diagnostics Incorporated’s (DGX - Free Report) fourth-quarter 2023 adjusted earnings per share (EPS) of $2.15 beat the Zacks Consensus Estimate by 0.5%. The metric also surpassed the year-ago adjusted figure by 8.6%.
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 $1.70 per share compared with 87 cents in the same period last year.
For the full year, adjusted earnings were $8.71 per share, down 12.5% from the year-ago period’s levels. However, the figure came in line with the Zacks Consensus Estimate.
Revenues
Revenues reported in the fourth quarter declined 1.9% year over year to $2.29 billion. However, revenues exceeded the Zacks Consensus Estimate by 1.8%.
Total revenues for 2023 were $9.25 billion, reflecting a 6.4% fall from the year-ago period. The figure beat the Zacks Consensus Estimate by 0.5%.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote
Quarterly Details
Base Business (excludes COVID-19 testing) revenues were $2.25 billion in the reported quarter, up 4.7% year over year. This figure compares with our model’s projection of $2.22 billion for the fourth quarter.
COVID-19 Testing revenues nosedived 79.9% in the fourth quarter to $37 million. However, the figure still exceeded our model’s projected revenues of $14 million from this segment in the fourth quarter of 2023.
Diagnostic Information Services revenues in the quarter were down 1.9% on a year-over-year basis to $2.22 billion. This figure compares with our model’s projection of $2.16 billion for the fourth quarter.
Volumes (measured by the number of requisitions) were up 1.9% year over year in the fourth quarter. Revenue per requisition declined 3.5% year over year.
Margins
The cost of services during the reported quarter was $1.55 billion, down 1.5% year over year. The gross profit declined 2.9% to $736 million. The gross margin was 32.2%, reflecting a 32-basis point (bps) contraction from the year-ago figure.
SG&A expenses fell 27.7% to $407 million in the quarter under review. The adjusted operating margin of 14.4% represented a 602-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited 2023 with cash and cash equivalents of $686 million compared with $315 million at the end of 2022. The cumulative net cash provided by operating activities at the end of 2023 was $1.27 billion compared with $1.72 billion at the end of 2022.
The company has a five-year annualized dividend growth rate of 7.36%.
Guidance
Quest Diagnostics initiated its full-year 2024 guidance.
Revenues for the full year are expected within the $9.35-$9.45 billion band. The Zacks Consensus Estimate is pegged at $9.38 billion.
Adjusted EPS is expected in the range of $8.60-$8.90. The Zacks Consensus Estimate for the metric is pegged at $8.96.
Our Take
Quest Diagnostics reported better-than-expected earnings and revenues in the fourth quarter of 2023. The company advanced its growth strategy with innovative testing solutions, new and expanded relationships with health systems and a robust pipeline of M&A and professional lab services opportunities. During the quarter, Quest Diagnostics strengthened its oncology offering with a strategic investment in higher growth minimal residual disease testing.
Robust revenue growth in several clinical areas, including advanced cardiometabolic, prenatal and hereditary genetics, and neurology is highly promising. Further, the expansion of the operating margin bodes well for the stock.
Meanwhile, fourth-quarter revenues were down year over year. The contraction of the gross margin raises apprehension.
Zacks Rank and Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Haemonetics (HAE - Free Report) and McKesson (MCK - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 10.9% for 2025. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Haemonetics, carrying a Zacks Rank #2, reported a second-quarter fiscal 2024 adjusted EPS of 99 cents, which beat the Zacks Consensus Estimate by 5.3%. For the third quarter, revenues are expected to increase 5.6% year over year.
HAE has an estimated fiscal 2024 earnings growth rate of 28.4% compared with the industry’s 17.3% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 16.1%.
Mckesson reported a third-quarter fiscal 2023 adjusted earnings of $6.90, which beat the Zacks Consensus Estimate by 8.8%. For the fourth quarter, revenues are expected to increase 9.9% year over year. It currently carries a Zacks Rank #2.
MCK has an estimated earnings growth rate of 14% for fiscal 2025 compared with the industry’s 13.5% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.9%.