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Quest Diagnostics (DGX) Tops Q2 Earnings, Raises 2024 Outlook
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Quest Diagnostics Incorporated’s (DGX - Free Report) second-quarter 2024 adjusted earnings per share (EPS) of $2.35 beat the Zacks Consensus Estimate by 1.7%. The metric also exceeded the year-ago adjusted figure by 2.2%.
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 $2.03 per share, down 1% from the last year’s comparable figure.
Quarterly Details
Revenues reported in the second quarter rose 2.5% year over year to $2.40 billion. The metric surpassed the Zacks Consensus Estimate by 0.5%.
Diagnostic Information Services revenues in the quarter were up 2.9% on a year-over-year basis to $2.33 billion. This figure compares with our model’s projection of $2.31 billion for the second quarter.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Volumes (measured by the number of requisitions) were up 1.1% year over year in the second quarter. Revenue per requisition increased 1.6% year over year.
Margins
The cost of services during the reported quarter was $1.59 billion, up 3% year over year. The gross profit came in at $804 million, up 1.5% year over year. The gross margin was 33.5%, reflecting a 33-basis point (bps) contraction from the year-ago figure.
SG&A expenses were $416 million in the quarter under review, similar to the second quarter of 2023. The adjusted operating margin of 16.2% represented a 10-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the second quarter of 2024 with cash and cash equivalents of $271 million compared with $474 million at the end of the first quarter. The cumulative net cash provided by operating activities at the end of the second quarter of 2024 was $514 million compared with $538 million in the comparable 2023 period.
Quest Diagnostics provided an updated full-year 2024 guidance.
Revenues for the full year are expected in the $9.50 billion-$9.58 billion band (previously $9.40 billion to $9.48 billion). This represents a year-over-year increase of 2.7%-3.5% (earlier 1.6%-2.5%). The Zacks Consensus Estimate is pegged at $9.45 billion.
Adjusted EPS is expected in the range of $8.80-$9.00 (previously $8.72 to $8.97). The Zacks Consensus Estimate for the metric is pegged at $8.85.
Our Take
Quest Diagnostics delivered better-than-expected earnings and revenues in the second quarter of 2024. The performance reflected base business growth as well as continued improvement in productivity and profitability in the base business. This was mainly due to an increase in new physician and hospital customers, a more favorable test mix that includes higher adoption of advanced diagnostics and sustained strength in healthcare utilization. The upbeat outlook for the full year instills optimism.
DGX also advanced in improving its operational quality and efficiency through greater use of automation and AI. Furthermore, Quest Diagnostics announced four new acquisitions that meet its criteria for growth, profitability and returns and also help it expand in strategic growth areas. The recent addition of the PathAI Diagnostics acquisition positions the company to rapidly scale digital pathology innovation, helping health systems and other providers improve cancer diagnoses. All these developments bode well for the stock.
On the flip side, the contraction of the gross margin in the quarter is discouraging.
Zacks Rank and Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Intuitive Surgical (ISRG - Free Report) , Abbott Laboratories, Inc. (ABT - Free Report) and Haemonetics (HAE - Free Report) .
Intuitive Surgicalreported a second-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgicalhas an estimated long-term earnings growth rate of 16.1% in 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 8.97%.
Abbott, carrying a Zacks Rank #2 (Buy), reported second-quarter 2024 earnings of $1.14, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%.
ABT has an estimated earnings growth rate of 10.1% for 2025 compared with the S&P 500’s 9.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 2.34%.
Haemonetics, carrying a Zacks Rank #2, reported a fiscal 2024 fourth-quarter adjusted EPS of 90 cents, which surpassed the Zacks Consensus Estimate by 2.3%. Revenues of $343.3 million exceeded the Zacks Consensus Estimate by 5%.
HAE has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 12.5%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 13.2%.
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Quest Diagnostics (DGX) Tops Q2 Earnings, Raises 2024 Outlook
Quest Diagnostics Incorporated’s (DGX - Free Report) second-quarter 2024 adjusted earnings per share (EPS) of $2.35 beat the Zacks Consensus Estimate by 1.7%. The metric also exceeded the year-ago adjusted figure by 2.2%.
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 $2.03 per share, down 1% from the last year’s comparable figure.
Quarterly Details
Revenues reported in the second quarter rose 2.5% year over year to $2.40 billion. The metric surpassed the Zacks Consensus Estimate by 0.5%.
Diagnostic Information Services revenues in the quarter were up 2.9% on a year-over-year basis to $2.33 billion. This figure compares with our model’s projection of $2.31 billion for the second quarter.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote
Volumes (measured by the number of requisitions) were up 1.1% year over year in the second quarter. Revenue per requisition increased 1.6% year over year.
Margins
The cost of services during the reported quarter was $1.59 billion, up 3% year over year. The gross profit came in at $804 million, up 1.5% year over year. The gross margin was 33.5%, reflecting a 33-basis point (bps) contraction from the year-ago figure.
SG&A expenses were $416 million in the quarter under review, similar to the second quarter of 2023. The adjusted operating margin of 16.2% represented a 10-bps expansion year over year.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the second quarter of 2024 with cash and cash equivalents of $271 million compared with $474 million at the end of the first quarter. The cumulative net cash provided by operating activities at the end of the second quarter of 2024 was $514 million compared with $538 million in the comparable 2023 period.
The company has a five-year annualized dividend growth rate of 7.74%.
Guidance
Quest Diagnostics provided an updated full-year 2024 guidance.
Revenues for the full year are expected in the $9.50 billion-$9.58 billion band (previously $9.40 billion to $9.48 billion). This represents a year-over-year increase of 2.7%-3.5% (earlier 1.6%-2.5%). The Zacks Consensus Estimate is pegged at $9.45 billion.
Adjusted EPS is expected in the range of $8.80-$9.00 (previously $8.72 to $8.97). The Zacks Consensus Estimate for the metric is pegged at $8.85.
Our Take
Quest Diagnostics delivered better-than-expected earnings and revenues in the second quarter of 2024. The performance reflected base business growth as well as continued improvement in productivity and profitability in the base business. This was mainly due to an increase in new physician and hospital customers, a more favorable test mix that includes higher adoption of advanced diagnostics and sustained strength in healthcare utilization. The upbeat outlook for the full year instills optimism.
DGX also advanced in improving its operational quality and efficiency through greater use of automation and AI. Furthermore, Quest Diagnostics announced four new acquisitions that meet its criteria for growth, profitability and returns and also help it expand in strategic growth areas. The recent addition of the PathAI Diagnostics acquisition positions the company to rapidly scale digital pathology innovation, helping health systems and other providers improve cancer diagnoses. All these developments bode well for the stock.
On the flip side, the contraction of the gross margin in the quarter is discouraging.
Zacks Rank and Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader medical space are Intuitive Surgical (ISRG - Free Report) , Abbott Laboratories, Inc. (ABT - Free Report) and Haemonetics (HAE - Free Report) .
Intuitive Surgicalreported a second-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgicalhas an estimated long-term earnings growth rate of 16.1% in 2024 compared with the industry’s 14.1%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 8.97%.
Abbott, carrying a Zacks Rank #2 (Buy), reported second-quarter 2024 earnings of $1.14, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%.
ABT has an estimated earnings growth rate of 10.1% for 2025 compared with the S&P 500’s 9.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 2.34%.
Haemonetics, carrying a Zacks Rank #2, reported a fiscal 2024 fourth-quarter adjusted EPS of 90 cents, which surpassed the Zacks Consensus Estimate by 2.3%. Revenues of $343.3 million exceeded the Zacks Consensus Estimate by 5%.
HAE has an estimated fiscal 2025 earnings growth rate of 15.4% compared with the industry’s 12.5%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 13.2%.