Quest Hits 3-Year High After Beating Quarterly Results Estimates

Quest Diagnostics Inc.’s DGX fourth-quarter 2024 adjusted earnings per share (EPS) of $2.23 beat the Zacks Consensus Estimate by 1.8%. The metric also exceeded the year-ago adjusted figure by 3.7%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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 $1.95 per share, up 14.7% from last year’s comparable figure.

For 2024, the company reported an adjusted EPS of $8.93, up 2.5% from the year-ago period’s levels. The figure surpassed the Zacks Consensus Estimate by 0.3%.

DGX shares dipped nearly 1.6% in pre-market trading following the earnings report.

DGX’s Revenues in Detail

Revenues reported in the fourth quarter rose 14.6% year over year to $2.62 billion. The metric surpassed the Zacks Consensus Estimate by 1.9%.

Total revenues for 2024 were $9.87 billion, reflecting a 6.4% increase from the year-ago period. The figure beat the Zacks Consensus Estimate by 0.5%.

Diagnostic Information Servicesrevenues in the quarter were up 15.1% on a year-over-year basis to $2.56 billion. This figure also surpassed our model’s projection of $2.48 billion for the fourth 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 13.9% year over year in the fourth quarter. Revenue per requisition increased 0.2% year over year.

DGX’s Margin Performance

The cost of services during the reported quarter was $1.76 billion, up 13.6% year over year. The gross profit came in at $858 million, up 16.6% year over year. The gross margin was 32.7%, reflecting a 57-basis point (bps) expansion from the year-ago figure.

SG&A expenses were $466 million in the quarter under review, up 14.5% from the fourth quarter of 2023. The adjusted operating margin of 14.9% represented a 58-bps expansion year over year.

DGX’s Liquidity and Financial Health

Quest Diagnostics exited the fourth quarter of 2024 with cash and cash equivalents of $549 million compared with $686 million at the end of 2023. The cumulative net cash provided by operating activities at the end of the fourth quarter of 2024 was $1.33 billion compared with $1.27 billion at the 2023-end.

The company has a five-year annualized dividendgrowth rate of 7.59%.

A Peek Into DGX’s 2025 Guidance

Quest Diagnostics issued its outlook for 2025, underscoring confidence in the core business strength, continuing robust utilization and the momentum from acquisitions completed in 2024.

Revenues for the full year are expected in the $10.70 billion-$10.85 billion band, indicating a year-over-year increase of 8.4%-9.9%. The Zacks Consensus Estimate is pegged at $10.67 billion.

Adjusted EPS is expected in the range of $9.55-$9.80. The Zacks Consensus Estimate for the metric is pegged at $9.71.

Our View on DGX

Quest Diagnostics reported better-than-expected earnings and revenues in the fourth quarter of 2024, which also increased from the comparable 2023 figures. The company marked several achievements this year, including growing its Advanced Diagnostics portfolio and deploying automation and AI technologies across diverse laboratories, customer service and administrative areas. Impressively, Quest Diagnostics completed eight acquisitions, including LifeLabs in Canada and four hospital outreach lab acquisitions.

The company benefitted from expanding the consumer-initiated testing offerings on the questhealth.com platform. The expansion of both margins in the quarter is highly encouraging.

DGX’s Zacks Rank & Other Key Picks

Quest Diagnostics currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are Masimo MASI, Insulet PODD and Haemonetics HAE.

Masimo reported third-quarter 2024 adjusted earnings of 98 cents per share, which topped the Zacks Consensus Estimate by 16.7%. Revenues of $504.6 million beat the Zacks Consensus Estimate by 0.4%. MASI sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MASI’s earnings yield of 2.6% remains well ahead of the industry’s -3.3% yield. The company surpassed earnings estimates in each of the trailing four quarters, the average surprise being 17.1%.

Insulet, carrying a Zacks Rank #2, posted third-quarter 2024 adjusted earnings of 90 cents per share, topping the Zacks Consensus Estimate by 16.9%. Revenues of $543.9 million exceeded the Zacks Consensus Estimate by 4.9%.

PODD has an estimated 2024 earnings growth rate of 17.1% compared with the industry’s 13.4%. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 52.4%.

Haemonetics, carrying a Zacks Rank #2, reported a second-quarter fiscal 2025 adjusted EPS of $1.12, which surpassed the Zacks Consensus Estimate by 2.8%. Revenues of $345.5 million topped the Zacks Consensus Estimate by 0.7%.

HAE has an earnings yield of 6.7% compared with the industry’s 0.4% growth. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 2.8%.

Zacks Investment Research

Quest Diagnostics (DGX) came out with quarterly earnings of $2.23 per share, beating the Zacks Consensus Estimate of $2.19 per share. This compares to earnings of $2.15 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 1.83%. A quarter ago, it was expected that this medical laboratory operator would post earnings of $2.26 per share when it actually produced earnings of $2.30, delivering a surprise of 1.77%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Quest Diagnostics, which belongs to the Zacks Medical - Outpatient and Home Healthcare industry, posted revenues of $2.62 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.96%. This compares to year-ago revenues of $2.29 billion. The company has topped consensus revenue estimates four times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Quest Diagnostics shares have added about 3% since the beginning of the year versus the S&P 500's gain of 2.7%.

What's Next for Quest Diagnostics?

While Quest Diagnostics has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Quest Diagnostics: favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $2.21 on $2.61 billion in revenues for the coming quarter and $9.71 on $10.67 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Medical - Outpatient and Home Healthcare is currently in the top 36% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Astrana Health, Inc. (ASTH), has yet to report results for the quarter ended December 2024.

This company is expected to post quarterly earnings of $0.09 per share in its upcoming report, which represents a year-over-year change of -65.4%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days.

Astrana Health, Inc.'s revenues are expected to be $630.99 million, up 78.7% from the year-ago quarter.

Zacks Investment Research