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Quest Diagnostics Inc DGX

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Quest Rides COVID-19 Wave in First Quarter, but Demand Is Softening; No Change to Our FVE

Debbie S. Wang Senior Equity Analyst

Analyst Note

| Debbie S. Wang |

Narrow-moat Quest Diagnostics posted another quarter of outsized performance thanks to COVID-19 tailwinds, but with softening demand already occurring, we’re leaving our fair value estimate unchanged and see shares as fairly valued. While quarterly revenue grew 49% in first quarter and we expect another strong showing in second quarter (against the weak second quarter in 2020), we’re keeping a close eye on the shift away from COVID-19 PCR testing as vaccinations in the U.S. continue to penetrate the adult population. Thanks to the boost in test volume and relatively generous reimbursement on COVID-19 PCR tests, Quest delivered eye-popping quarterly operating profit and adjusted earnings per share that increased 375% and nearly 300%, respectively.

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Company Profile

Business Description

Quest Diagnostics is a leading independent provider of diagnostic testing, information, and services in the U.S. The company generates over 95% of its revenue through clinical testing, anatomic pathology, esoteric testing, and substance abuse testing with specimens collected at its national network of nearly 2,300 patient service centers, as well as multiple doctors offices and hospitals. The firm also runs a diagnostic solutions segment that provides clinical trials testing, risk assessment services, and information technology solutions.

500 Plaza Drive
Secaucus, NJ, 07094
T +1 973 520-2700
Sector Healthcare
Industry Diagnostics & Research
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type Aggressive Growth
Employees 49,000