Quest Diagnostics Inc DGX

Quest Diagnostics Earnings: COVID-19 Test Demand Decline Partially Offset by Robust Base Business

Narrow-moat Quest Diagnostics posted decent third-quarter results that illustrated another quarter of solid demand for non-COVID-19 tests that partially offset the significant decline in COVID-19 test revenue. With the top and bottom lines on track to meet our full-year expectations, we’re leaving our $143 fair value estimate unchanged. While quarterly total revenue fell 8% year over year, this was primarily driven by the 92% decrease in COVID-19 test revenue. We were pleased to see base business sales up 5% in the quarter, supported by mid-single-digit volume growth. In particular, several test areas saw double-digit revenue growth, including neurology, reproductive, immunology, and sexually transmitted infections. We think Quest has already weathered the worst of the COVID-19 decline, as both demand and reimbursement for the tests have fallen. Quarterly sequential declines have decelerated markedly and absolute COVID-19 revenue is now a small contributor to Quest's consolidated sales.