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Quest Diagnostics Incorporated’s (DGX - Free Report) first-quarter 2020 adjusted earnings per share of 94 cents surpassed the Zacks Consensus Estimate by 13.3%. Adjusted earnings declined 32.9% from the year-ago number.
Certain one-time expenses, like the ones related to the COVID-19 pandemic and their resultant impact including certain asset impairment charges; as well as incremental costs incurred to protect the health and safety of employees and customers and to transition certain employees to a remote work environment, were excluded from the quarter’s adjusted figures.
GAAP earnings from continuing operations came in at 73 cents per share, marking a 39.2% decline from the year-ago quarter.
Reported revenues in the first quarter declined 3.7% year over year to $1.82 billion. The same beat the consensus estimate by 4.6%.
Quarterly Details
Volumes (measured by the number of requisitions) declined 2.4% year over year in the first quarter (down 2.7% organically). Revenue per requisition also inched down 1.2% year over year.
Diagnostic information services revenues in the quarter were down 3.8% on a year-over-year basis to $1.74 billion.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Cost of services during the reported quarter was $1.27 billion, up 2.1% year over year. Gross margin came in at 30.3%, reflecting contraction of 392 basis points (bps) from the year-ago figure.
Adjusted operating margin of 11.3% represented a 266-bps contraction year over year. Selling, general and administrative expenses declined 9.6% to $347 million in the quarter under review.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the first quarter of 2020 with cash and cash equivalents of $342 million compared with $1.19 billion at the end of 2019. First-quarter net cash provided by operating activities was $247 million compared with $275 million a year ago.
For the three months ended Mar 31, 2020, the company repurchased 0.7 million shares of its common stock for $75 million but suspended additional share repurchases through the end of the year under its existing authorization.
The company's board of directors remains committed to its quarterly dividend at this time.
Withdraws 2020 Guidance
Given the rapidly-changing uncertainties and likely outcomes of coronavirus, Quest Diagnostics is currently unable to gauge the near-term impact on its business. The company looks to announce its updated outlook at an ‘appropriate time’.
Our Take
Quest Diagnostics reported better-than-expected first-quarter figures. However the year-over-year decline in adjusted earnings and as well as revenues were concerning. Management noted that, Quest Diagnostics’ results in January and February were consistent with its earlier-provided full-year guidance. However, in March, the company experienced a significant decline in testing volumes since the COVID-19 took the shape of pandemic. During the last two weeks of March, volumes declined over 40%, including COVID-19 testing.
In terms of coronavirus-related test update, to date, the company has performed nearly one million molecular tests and has begun to perform blood-based antibody testing.
Zacks Rank & Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
The Zacks Consensus Estimate for Chemed’s first-quarter 2020 revenues is pegged at $523.6 million, suggesting 13.3% growth from the prior-year reported figure. The same for adjusted earnings per share is anticipated at $3.65, indicating 25% improvement from the year-ago reported number.
The Zacks Consensus Estimate for DexCom’s first-quarter 2020 revenues is $356.5 million, implying 27.1% increase from the year-earlier reported figure. The same for adjusted earnings per share stands at 10 cents, indicating 300% surge from the year-ago reported figure.
The Zacks Consensus Estimate for ViewRay’s first-quarter 2020 earnings per share stands at a loss of 20 cents, suggesting 41.8% improvement from the year-ago period.
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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Quest Diagnostics' (DGX) Q1 Earnings Beat, Margins Decline
Quest Diagnostics Incorporated’s (DGX - Free Report) first-quarter 2020 adjusted earnings per share of 94 cents surpassed the Zacks Consensus Estimate by 13.3%. Adjusted earnings declined 32.9% from the year-ago number.
Certain one-time expenses, like the ones related to the COVID-19 pandemic and their resultant impact including certain asset impairment charges; as well as incremental costs incurred to protect the health and safety of employees and customers and to transition certain employees to a remote work environment, were excluded from the quarter’s adjusted figures.
GAAP earnings from continuing operations came in at 73 cents per share, marking a 39.2% decline from the year-ago quarter.
Reported revenues in the first quarter declined 3.7% year over year to $1.82 billion. The same beat the consensus estimate by 4.6%.
Quarterly Details
Volumes (measured by the number of requisitions) declined 2.4% year over year in the first quarter (down 2.7% organically). Revenue per requisition also inched down 1.2% year over year.
Diagnostic information services revenues in the quarter were down 3.8% on a year-over-year basis to $1.74 billion.
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote
Margins
Cost of services during the reported quarter was $1.27 billion, up 2.1% year over year. Gross margin came in at 30.3%, reflecting contraction of 392 basis points (bps) from the year-ago figure.
Adjusted operating margin of 11.3% represented a 266-bps contraction year over year. Selling, general and administrative expenses declined 9.6% to $347 million in the quarter under review.
Cash, Capital Structure and Solvency
Quest Diagnostics exited the first quarter of 2020 with cash and cash equivalents of $342 million compared with $1.19 billion at the end of 2019. First-quarter net cash provided by operating activities was $247 million compared with $275 million a year ago.
For the three months ended Mar 31, 2020, the company repurchased 0.7 million shares of its common stock for $75 million but suspended additional share repurchases through the end of the year under its existing authorization.
The company's board of directors remains committed to its quarterly dividend at this time.
Withdraws 2020 Guidance
Given the rapidly-changing uncertainties and likely outcomes of coronavirus, Quest Diagnostics is currently unable to gauge the near-term impact on its business. The company looks to announce its updated outlook at an ‘appropriate time’.
Our Take
Quest Diagnostics reported better-than-expected first-quarter figures. However the year-over-year decline in adjusted earnings and as well as revenues were concerning. Management noted that, Quest Diagnostics’ results in January and February were consistent with its earlier-provided full-year guidance. However, in March, the company experienced a significant decline in testing volumes since the COVID-19 took the shape of pandemic. During the last two weeks of March, volumes declined over 40%, including COVID-19 testing.
In terms of coronavirus-related test update, to date, the company has performed nearly one million molecular tests and has begun to perform blood-based antibody testing.
Zacks Rank & Key Picks
Quest Diagnostics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Chemed Corporation (CHE - Free Report) , DexCom (DXCM - Free Report) and ViewRay, Inc. . All the three stocks carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Chemed’s first-quarter 2020 revenues is pegged at $523.6 million, suggesting 13.3% growth from the prior-year reported figure. The same for adjusted earnings per share is anticipated at $3.65, indicating 25% improvement from the year-ago reported number.
The Zacks Consensus Estimate for DexCom’s first-quarter 2020 revenues is $356.5 million, implying 27.1% increase from the year-earlier reported figure. The same for adjusted earnings per share stands at 10 cents, indicating 300% surge from the year-ago reported figure.
The Zacks Consensus Estimate for ViewRay’s first-quarter 2020 earnings per share stands at a loss of 20 cents, suggesting 41.8% improvement from the year-ago period.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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