Quest Earnings: Strong Base Business Volume Gains Drive Favorable Results

Narrow-moat Quest Diagnostics posted solid first-quarter results that held few surprises. With the firm on track to meet our expectations for the full year, we’re leaving our $143 fair value estimate intact. With quarterly revenue up 1.5% on a consolidated basis, Quest has finally reached the end of the long covid-19 unwinding, as base business growth of close to 6% more than offset the decline in covid revenue. Considering covid revenue is small enough to be immaterial this year, Quest’s growth will rely on the rest of its test portfolio. Fortunately, test utilization continued to demonstrate strength, as base business volume rose 3% year over year. The robust results were strong enough for management to raise its outlook for 2024. Our revenue estimate for 2024 remains at the lower end of Quest’s new guidance, primarily because we’re wary of how long the strength in medical utilization last year can continue into 2024. Management has indicated utilization is likely to normalize through the year, and we’re inclined to agree.