Quest Diagnostics Posts Q3 Beat and Raises FY2021 Guidance

Quest Diagnostics, Inc. (DGX) reported stronger-than-expected Q3 results, topping both earnings and revenue estimates driven by higher COVID-19 molecular volumes as well as an overall rebound in its base business. The company also raised its FY2021 guidance well above analyst expectations.

Despite the beat and the raised guidance, shares of the developer and provider of diagnostic information services to patients, various healthcare professionals, and hospitals globally declined 1% to close at $145.36 on October 21. (See DGX stock charts on TipRanks)

Adjusted earnings of $3.96 per share decreased 7.9% year-over-year but significantly beat analysts’ expectations of $2.67 per share. The company reported earnings of $4.31 per share in the prior-year period.

Revenues declined marginally by 0.4% year-over-year to $2.77 billion but exceeded consensus estimates of $2.42 billion.

Based on better-than-expected COVID-19 testing volumes and base business performance, the company raised its full-year 2021 guidance. The company now forecasts adjusted earnings in the range of $13.50 – $13.90 per share, while the consensus estimate is pegged at $11.93 per share. This compares to the prior guidance range of $11.65 – $12.35 per share.

Furthermore, revenues are forecast to be in the range of $10.45 – 10.6 billion, versus the consensus estimate of $10 billion and prior-guided range of $9.84 – 10.09 billion.

Quest Diagnostics CEO Steve Rusckowski commented “We have raised our outlook for the remainder of the year based on higher than anticipated COVID-19 volumes as well as the continued progress we expect to see in our base business despite rising labor costs and inflationary pressures. The momentum of our base business positions us to deliver the 2022 outlook we shared at our March investor day.”   

Last month, Citigroup analyst Ralph Giacobbe increased the price target on Quest Diagnostics to $181 (24.5% upside potential) from $158 and reiterated a Buy rating.

Overall, the stock has a Moderate Buy consensus rating based on 6 Buys and 3 Holds. The average Quest Diagnostics price target is $162.50, implying 12% upside potential from current levels. 

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