Quest Diagnostics (DGX, Financial) shares are trading near a 52-week high of $143.64 as of the writing of this article, boosted by outstanding revenue growth in the second quarter and an encouraging forecast for the full year. The company has a $17.5 billion market cap.
The company posted a 40% jump in sales to $2.55 billion in the second quarter. It said the gains were the result of patients returning to clinics for screenings for heart disease or cancer. While testing for these conditions had frequently been put on hold due to the pandemic, Quest was able to pick up some of the slack with Covid-19 testing. The company’s quarterly earnings of $3.18 per share beat the Zacks consensus estimate of $2.87, far higher than the EPS of $1.42 per share a year ago.
Fierce Biotech reported that the company thinks its base business will return to normal levels before the end of the year. As a result, it is forecasting revenues of $9.54 billion to $9.79 billion, a small gain from 2020, when sales soared more than 22% from the previous year.
By no means is Quest writing off its Covid testing business - far from it. The company is processing about 1.8 billion tests per day, and Covid diagnostics will be an enduring part of its business, CEO Steve Rusckowski said at last week’s investor day. Moreover, Quest is seeing Covid testing picking up lately due to the more contagious and vaccine-resistant variants sweeping the U.S.
Quest’s growth has been driven in part by strategic partnerships with Hackensack Meridian Health, health care technology company Ro and Anthem, Inc. (ANTM, Financial). Last year Quest announced that it had completed its acquisition of its joint venture partners’ interests in Mid America Clinical Laboratories, the largest independent clinical laboratory provider in Indiana.
However, despite Quest's strong growth and outlook, there is one other company in the diagnositics space that analyts are even more bullish on, and that's Laboratory Corporation of America Holdings (LH, Financial), aka Labcorp. Labcorp's Covid experience has pretty much mirrored Quest’s.
In terms of recent performance, both Labcorp and Quest's share prices are up about 8% in the past month. Labcorp recently raised its 2021 adjusted profit forecast to the $21.50 to $25 per share range from an earlier forecast of $20 to $24 per share on gains in its diagnostics unit, which provides services such as genetic, pathology and drug monitoring, reported Reuters.
According to CNN Money, analysts see Labcorp as having far greater upside. The 14 analysts providing 12-month price forecasts for Labcorp set a median target of about $327, with a high estimate of $350 and a low estimate of $215. Meanwhile, 13 analysts assigned Quest a median target of $150, with a high estimate of $160 and a low estimate of $135.
