TECH Gears Up to Report Q2 Earnings: Here's What to Expect

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

Stryker Corporation SYK reported fourth-quarter 2024 adjusted earnings per share (EPS) of $4.01, which beat the Zacks Consensus Estimate of $3.87 by 3.6%. The bottom line also improved 15.9% year over year. Our model estimate for the metric was $3.85 billion.

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

GAAP EPS was $1.41, down 52.7% from the year-ago quarter’s level. The significant decline was due to recording of a goodwill and impairment charge related to SYK’s Spine business. The company has inked an agreement to divest the Spine implant unit yesterday.

Revenue Details

Revenues totaled $6.44 billion, which beat the Zacks Consensus Estimate by 1.3%. The top line also improved 10.7% on a year-over-year basis and 11.2% at constant currency (cc). Our model estimated total sales to be $6.33 billion.

Revenues by Geography

Revenues in the United States amounted to $4.87 billion, up 11.8% from the prior-year quarter’s level. International sales increased 7.2% year over year to $1.56 billion.

Segmental Analysis

Stryker recently signed an agreement to sell its U.S. spinal implants business to Viscogliosi Brothers, LLC, a family-owned investment firm specializing in the neuro-musculoskeletal space. The new company will be called VB Spine, LLC. Stryker also plans to sell related international business. The divestment is likely to be completed by the first half of 2025.

Effective in the fourth quarter, its Spine enabling technologies results are reported as part of other orthopedics. Interventional Spine results are reported as part of neurocrine. As a result, spinal implants are now reported separately within orthopedics.

MedSurg and Neurotechnology: This segment reported sales of $3.88 billion, up 10.6% year over year and 11.1% at cc. Our model estimated segment sales to be $3.75 billion.

In the quarter under review, MedSurg and Neurotechnology recorded organic sales growth of 10.1%, which included 11.5% of U.S. organic growth and 5.8% of international organic growth. Instruments recorded U.S. organic sales growth of 8.8%, led by healthy growth in both the Surgical Technologies and orthopedic implants businesses. From a product perspective, sales growth was led by smoke evacuation, waste management, power tools and SteriShield.

Stryker Corporation Price, Consensus and EPS Surprise

Stryker Corporation price-consensus-eps-surprise-chart | Stryker Corporation Quote

Endoscopy saw 12.9% U.S. organic growth, driven by strong demand for OR infrastructure, the 1788 video platform and sports medicine products. Medical grew 11.1%, led by emergency care and Sage. Key product drivers included beds, Sage products, transport capital, and defibrillators, contributing to overall strong sales performance across both segments.

Neurovascular grew 12% in the United States, driven by strong hemorrhagic sales and improved ischemic performance. Neurocranial saw 13.3% growth, led by strong demand for bone mills, high-speed drills, bipolar forceps, craniomaxillofacial and interventional spine products.

International sales were driven by growth in Instruments and Endoscopy businesses, especially strong performances in Canada and the United Kingdom.

Orthopedics: Sales in the segment amounted to $2.55 billion, up 10.8% year over year and 11.3% at cc. Organically, sales were up 10.2%, which included organic growth of 10% in the United States and 10.5% internationally. The knee business grew 8.5% organically, reflecting its market-leading position in robotic-assisted knee procedures and momentum from the continued strength of its new Mako installations. Our model estimated Orthopedics sales to be $2.57 billion.

U.S. hips grew 7.1%, driven by Cigna hip stem success and Mako robotic platform momentum. Trauma and Extremities surged 16.2%, led by strong core trauma and upper extremities growth. Spinal implants rose 2.3%, while Enabling Technologies boosted other ortho by 1.3%. International Orthopaedics grew 10.5%, with strength in emerging markets like Australia, New Zealand, Europe and Canada.

Margins

Adjusted gross profit totaled $4.2 billion in the reported quarter, up 13.2% from the year-ago quarter’s level. Adjusted gross margin expanded 140 basis points (bps) to 65.3%. The improvement was primarily driven by positive pricing, manufacturing cost improvements and mix.

Total operating expenses were $3.59 billion, up 46.9% from the year-ago quarter’s level.

Adjusted operating income totaled $1.88 billion, up 18.6% from the year-ago level. Adjusted operating margin was 29.2%, up 200 bps.

Financial Update

Stryker exited the fourth quarter with cash and cash equivalents of $3.65 billion compared with $4.68 billion at the end of the third quarter of 2024.

Cumulative net cash provided by operating activities totaled $4.24 billion compared with $3.71 billion a year ago.

2025 Guidance

Stryker issued its guidance for 2025. The company expects total revenues to grow in the range of 8-9% on an organic basis. The Zacks Consensus Estimate for total revenues is pegged at $22.51 billion, implying growth of 9.8%. Based on the steady progress of the company’s pricing actions, it expects pricing impact to be modestly favorable.

SYK expects adjusted EPS to be in the band of $13.45-$13.70. The Zacks Consensus Estimate for earnings is pegged at $13.52 per share.

If foreign exchange rates hold near current levels, the company anticipates approximately 1% unfavorable impact on full-year net sales and 10-15 cents on adjusted EPS.

Meanwhile, SYK is expected to close the acquisition of Inari Medical by the end of February. On a constant currency basis, Inari is likely to add approximately $590 million of sales in the 2025 stub period and have dilutive impacts on an adjusted operating income margin of 0-20 bps. The acquisition is expected to be accretive by 20-30 cents to the adjusted EPS.

Wrapping Up

Stryker exited fourth-quarter 2024 on a strong note, wherein earnings and revenues beat the Zacks Consensus Estimate. The company delivered a strong performance in the U.S. market, notably in Instruments, Medical, Endoscopy, Trauma and Extremities and Mako. Strong International sales also buoyed optimism. SYK expects the momentum in the international market to continue in 2025. However, sales outlook for 2025 fell short of estimates, likely leading to a 1.3% decline in SYK’s share price during after-market trading on Jan. 29.

The company’s shares have gained 16.7% in the past six months compared with the industry’s growth of 16.6%. The broader S&P 500 Index has increased 10.8% in the same time frame.