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Quest Diagnostics (DGX) to Post Q1 Earnings: What's in Store?
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Quest Diagnostics (DGX - Free Report) is set to release first-quarter 2024 results on Apr 23 before the opening bell.
The company posted adjusted earnings per share (EPS) of $2.15 in the last reported quarter, which surpassed the Zacks Consensus Estimate by 0.47%. Quest Diagnostics beat earnings estimates in each of the trailing four quarters, the average surprise being 2.13%.
Let’s look at how things have shaped up before this announcement.
Factors at Play
Base Business
In the first quarter of 2024, the company is likely to have made substantial progress on its strategy to drive top-line growth across the core customer channels and also improve its profitability. Throughout last year, DGX introduced innovative testing solutions, forged new and expanded relationships with health systems and pursued a robust pipeline of M&A and professional lab services opportunities. We assume such developments to have benefited the company’s revenues in the to-be-reported quarter.
Quest Diagnostics is expected to have driven robust growth across several clinical areas within Advanced diagnostics, including advanced cardiometabolic, prenatal and hereditary genetics and neurology. Growth in neurology may have been largely driven by its comprehensive Alzheimer's disease portfolio of tests. The expanding menu features innovations like AD-Detect blood testing services and the P-Tau181 biomarker to complement insights from amyloid beta testing.
Quest Diagnostics Incorporated Price and EPS Surprise
Moreover, the company focuses on faster-growing clinical areas such as molecular genomics and oncology to drive growth across its customer channels. In the first quarter of 2024, DGX may have benefited from its enhanced oncology offering, bolstered by strategic investments made in higher growth and minimal residual disease testing. In February 2024, the company launched a highly advanced predictive gene expression test to help personalize treatment decisions for patients with melanoma.
In Physician Lab Services, DGX’s base revenue growth may have stemmed from a return to care, overall market growth and share gains, driven by the competitive strength of its scale and innovative offerings. Acquisitions, such as hospital outreach and independent lab purchases, are likely to have helped generate volume for the company’s physician channel. In January 2024, Quest Diagnostics acquired select assets of the outreach lab services business of Steward Health Care System and also acquired the assets of Lenco Diagnostics Laboratories, Inc. through a business combination. These strategic developments are expected to have positively impacted DGX’s revenues in the first quarter of 2024.
We also assume Quest Diagnostics’ robust partnerships with health plans to have significantly driven revenues in the to-be-reported quarter. The company is likely to have generated a majority of its health plan revenues from value-based contracts, enabling faster growth compared to traditional health plan contracts. Together with health plans, DGX may have continued its efforts to reduce lab leakage to high-cost out-of-network labs, partly by redirecting the volume to the company. These initiatives are expected to have favorably boosted the company’s first-quarter revenues.
Within hospital lab services, strength in both reference and professional laboratory services (PLS) may have driven robust base business revenue growth in the to-be-reported quarter. Similar to Q4 2023, hospital reference testing may have particularly grown much faster than historical trends and well above the company’s anticipated market growth. Furthermore, DGX’s recently completed two PLS relationships are expected to have modestly contributed to its growth in the first quarter of 2024, thereby benefiting the top line.
DGX may have also delivered strong base business growth from its consumer-initiated testing service in the first quarter of 2024. In February 2024, the company availed the first PFAS (polyfluorinated alkyl substances, also known as forever chemicals) blood test as a consumer-initiated test on questhealth.com. The novel test is directed at individuals who may be at risk of elevated PFAS exposure and aligns with the several facets of new CDC (Centers for Disease Control and Prevention) guidance as well as recommendations from the National Academies of Sciences, Engineering and Medicine.
In terms of operational and productivity improvements, DGX may have continued to make progress in using front-end automation to enhance specimen processing. The company is likely to have expanded the use of AI to improve quality, efficiency and workforce experience in several clinical areas. Quest Diagnostics successfully achieved its targeted Invigorate goal at the end of 2023, which helped it offset the cost headwinds faced throughout the year. These developments and actions are likely to have benefited the company’s performance and metrics in the to-be-reported quarter as well.
Our model projects Quest Diagnostics’ Base business revenues to improve 2.6% year over year in the first quarter of 2024.
COVID-19 Testing Service
Like the last few reported quarters, Quest Diagnostics is expected to have registered a decline in Diagnostic Information Services revenues in the first quarter due to the runoff of the COVID-19 testing business. Revenue per requisition is likely to have decreased in the to-be-reported quarter due to lower COVID-19 molecular volumes. The company anticipates COVID-19 revenues to decline by at least $175 million in 2024, partially offsetting the growth projected from the base business. A majority of the COVID-19 headwind is expected to occur during the first quarter, thereby affecting revenues.
Going by our model, COVID-19 testing revenues are projected to have declined 92.3% year over year in the first quarter of 2024.
Q1 Estimates
For the first quarter of 2024, the Zacks Consensus Estimate for Quest Diagnostics’ revenues is pegged at $2.29 billion, which suggests a decline of 1.7% from the year-ago reported figure.
The Zacks Consensus Estimate for the company’s first-quarter EPS of $1.86 indicates an 8.8% fall from the year-ago reported figure.
What Our Model Suggests
Per our proven model, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, have a higher chance of beating estimates. However, that is not the case here, as you can see below:
Earnings ESP: Quest Diagnostics has an Earnings ESP of -1.31%. 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 #4 (Sell).
Stocks Worth a Look
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter:
TransMedics has an expected earnings growth rate of 81.8% for 2024. TMDX surpassed earnings in each of the trailing four quarters, the average being 107.83%.
Inspire Medical Systems (INSP - Free Report) has an Earnings ESP of +18.04% and a Zacks Rank #1. The company is set to release first-quarter 2024 results on May 7.
INSP has an expected long-term earnings growth rate of 51.4% compared to the S&P 500’s 17.1%. The company surpassed earnings in each of the trailing four quarters, the average being 353.55%.
Insulet (PODD - Free Report) currently has an Earnings ESP of +11.11% and a Zacks Rank #2. The company is set to release its first-quarter 2024 results on May 9.
PODD has an expected long-term earnings growth rate of 18.1% compared to the industry’s 11.4%. The company surpassed earnings in each of the trailing four quarters, the average being 100.09%.
Image: Bigstock
Quest Diagnostics (DGX) to Post Q1 Earnings: What's in Store?
Quest Diagnostics (DGX - Free Report) is set to release first-quarter 2024 results on Apr 23 before the opening bell.
The company posted adjusted earnings per share (EPS) of $2.15 in the last reported quarter, which surpassed the Zacks Consensus Estimate by 0.47%. Quest Diagnostics beat earnings estimates in each of the trailing four quarters, the average surprise being 2.13%.
Let’s look at how things have shaped up before this announcement.
Factors at Play
Base Business
In the first quarter of 2024, the company is likely to have made substantial progress on its strategy to drive top-line growth across the core customer channels and also improve its profitability. Throughout last year, DGX introduced innovative testing solutions, forged new and expanded relationships with health systems and pursued a robust pipeline of M&A and professional lab services opportunities. We assume such developments to have benefited the company’s revenues in the to-be-reported quarter.
Quest Diagnostics is expected to have driven robust growth across several clinical areas within Advanced diagnostics, including advanced cardiometabolic, prenatal and hereditary genetics and neurology. Growth in neurology may have been largely driven by its comprehensive Alzheimer's disease portfolio of tests. The expanding menu features innovations like AD-Detect blood testing services and the P-Tau181 biomarker to complement insights from amyloid beta testing.
Quest Diagnostics Incorporated Price and EPS Surprise
Quest Diagnostics Incorporated price-eps-surprise | Quest Diagnostics Incorporated Quote
Moreover, the company focuses on faster-growing clinical areas such as molecular genomics and oncology to drive growth across its customer channels. In the first quarter of 2024, DGX may have benefited from its enhanced oncology offering, bolstered by strategic investments made in higher growth and minimal residual disease testing. In February 2024, the company launched a highly advanced predictive gene expression test to help personalize treatment decisions for patients with melanoma.
In Physician Lab Services, DGX’s base revenue growth may have stemmed from a return to care, overall market growth and share gains, driven by the competitive strength of its scale and innovative offerings. Acquisitions, such as hospital outreach and independent lab purchases, are likely to have helped generate volume for the company’s physician channel. In January 2024, Quest Diagnostics acquired select assets of the outreach lab services business of Steward Health Care System and also acquired the assets of Lenco Diagnostics Laboratories, Inc. through a business combination. These strategic developments are expected to have positively impacted DGX’s revenues in the first quarter of 2024.
We also assume Quest Diagnostics’ robust partnerships with health plans to have significantly driven revenues in the to-be-reported quarter. The company is likely to have generated a majority of its health plan revenues from value-based contracts, enabling faster growth compared to traditional health plan contracts. Together with health plans, DGX may have continued its efforts to reduce lab leakage to high-cost out-of-network labs, partly by redirecting the volume to the company. These initiatives are expected to have favorably boosted the company’s first-quarter revenues.
Within hospital lab services, strength in both reference and professional laboratory services (PLS) may have driven robust base business revenue growth in the to-be-reported quarter. Similar to Q4 2023, hospital reference testing may have particularly grown much faster than historical trends and well above the company’s anticipated market growth. Furthermore, DGX’s recently completed two PLS relationships are expected to have modestly contributed to its growth in the first quarter of 2024, thereby benefiting the top line.
DGX may have also delivered strong base business growth from its consumer-initiated testing service in the first quarter of 2024. In February 2024, the company availed the first PFAS (polyfluorinated alkyl substances, also known as forever chemicals) blood test as a consumer-initiated test on questhealth.com. The novel test is directed at individuals who may be at risk of elevated PFAS exposure and aligns with the several facets of new CDC (Centers for Disease Control and Prevention) guidance as well as recommendations from the National Academies of Sciences, Engineering and Medicine.
In terms of operational and productivity improvements, DGX may have continued to make progress in using front-end automation to enhance specimen processing. The company is likely to have expanded the use of AI to improve quality, efficiency and workforce experience in several clinical areas. Quest Diagnostics successfully achieved its targeted Invigorate goal at the end of 2023, which helped it offset the cost headwinds faced throughout the year. These developments and actions are likely to have benefited the company’s performance and metrics in the to-be-reported quarter as well.
Our model projects Quest Diagnostics’ Base business revenues to improve 2.6% year over year in the first quarter of 2024.
COVID-19 Testing Service
Like the last few reported quarters, Quest Diagnostics is expected to have registered a decline in Diagnostic Information Services revenues in the first quarter due to the runoff of the COVID-19 testing business. Revenue per requisition is likely to have decreased in the to-be-reported quarter due to lower COVID-19 molecular volumes. The company anticipates COVID-19 revenues to decline by at least $175 million in 2024, partially offsetting the growth projected from the base business. A majority of the COVID-19 headwind is expected to occur during the first quarter, thereby affecting revenues.
Going by our model, COVID-19 testing revenues are projected to have declined 92.3% year over year in the first quarter of 2024.
Q1 Estimates
For the first quarter of 2024, the Zacks Consensus Estimate for Quest Diagnostics’ revenues is pegged at $2.29 billion, which suggests a decline of 1.7% from the year-ago reported figure.
The Zacks Consensus Estimate for the company’s first-quarter EPS of $1.86 indicates an 8.8% fall from the year-ago reported figure.
What Our Model Suggests
Per our proven model, stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, have a higher chance of beating estimates. However, that is not the case here, as you can see below:
Earnings ESP: Quest Diagnostics has an Earnings ESP of -1.31%. 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 #4 (Sell).
Stocks Worth a Look
Here are some medical stocks worth considering as these have the right combination of elements to post an earnings beat this quarter:
TransMedics Group (TMDX - Free Report) has an Earnings ESP of +60.00% and a Zacks Rank #1. The company is expected to release first-quarter 2024 results on May 6. You can see the complete list of today’s Zacks #1 Rank stocks here.
TransMedics has an expected earnings growth rate of 81.8% for 2024. TMDX surpassed earnings in each of the trailing four quarters, the average being 107.83%.
Inspire Medical Systems (INSP - Free Report) has an Earnings ESP of +18.04% and a Zacks Rank #1. The company is set to release first-quarter 2024 results on May 7.
INSP has an expected long-term earnings growth rate of 51.4% compared to the S&P 500’s 17.1%. The company surpassed earnings in each of the trailing four quarters, the average being 353.55%.
Insulet (PODD - Free Report) currently has an Earnings ESP of +11.11% and a Zacks Rank #2. The company is set to release its first-quarter 2024 results on May 9.
PODD has an expected long-term earnings growth rate of 18.1% compared to the industry’s 11.4%. The company surpassed earnings in each of the trailing four quarters, the average being 100.09%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.