Quest Diagnostics Earnings: Non-COVID-19 Base Business Delivered Solid Fourth-Quarter Results

Quest Diagnostics finished the year in strong fashion, generally consistent with our 2023 estimates, and with our projections for 2024 within the bounds of management’s outlook, we’re leaving our fair value estimate unchanged. On the whole, fundamentals of the underlying non-COVID-19 business remain steady. Though quarterly consolidated revenue fell 2% (driven by declines in COVID-19 demand), quarterly base business rose 5%, supported by a year-over-year volume increase of 5.2%. We think the fourth-quarter volume growth bodes well for continued strength in 2024. On the negative side, quarterly revenue-per-requisition fell by 3.5%, fueled primarily by the loss of high-margin COVID-19 tests. By midyear, we anticipate Quest will have settled in at normalized COVID-19 test contributions. The firm’s recent progress with its hospital reference lab business, impending rollout of its Haystack oncology test to detect minimal residual disease, and ongoing acquisition of hospital outreach programs leave us comfortable that Quest’s narrow economic moat remains intact.