Why is Quest Diagnostics (DGX) up 3.1% since its last earnings report?

It’s been a month since Quest Diagnostics (DGX) last reported earnings. Shares rose about 3.1% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Quest Diagnostics headed for a decline? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the key drivers.

Quest Diagnostics’ first quarter profit exceeded, margin decreased

Quest Diagnostics Incorporated’s first-quarter 2024 adjusted earnings per share of $2.04 beat the Zacks Consensus Estimate by 9.7%. However, these data were consistent with the data corrected a year earlier.

Certain non-recurring expenses, such as depreciation and amortization costs, certain restructuring and integration charges, other expenses and excess stock-based compensation tax credits, have been excluded from the adjusted quarterly data.

GAAP earnings were $1.72 per share, down 3.4% from the comparable result last year.

Quarterly details

Revenue reported in the first quarter increased 1.5% year over year to $2.37 billion. The ratio surpassed the Zacks Consensus Estimate by 3.3%.

Diagnostic information services revenue for the quarter increased 1.7% year-over-year to $2.30 billion. This figure compares to our model’s forecast of $2.21 billion for the first quarter.

Volumes (measured by demand) in the first quarter increased by 1.6% year over year. Revenue per demand increased by 0.1% year over year.

Margins

Cost of services in the reported quarter was $1.60 billion, up 2.2% year-over-year. Gross profit was $771 million, consistent with Q1 2023. Gross margin was 32.6%, reflecting a decline of 49 basis points (bps) compared to last year.

Selling, general and administrative expenses increased 0.2% to $440 million in the quarter. Adjusted operating margin of 14% represents a decline of 25 basis points year over year.

Cash, capital structure and solvency

Quest Diagnostics ended the first quarter of 2024 with cash and cash equivalents of $474 million, compared to $686 million at the end of 2023. Cumulative net cash from operating activities at the end of the first quarter of 2024 was $154 million, compared from USD 94 million at the end of the first quarter of 2023.

The company has a five-year annual dividend growth rate of 7.48%.

Conductivity

Quest Diagnostics has provided updated guidance for the full year 2024.

Full-year revenue is expected to be $9.40 billion to $9.48 billion (previously $9.35 billion to $9.45 billion). The Zacks Consensus Estimate is $9.39 billion.

Adjusted earnings per share are expected to be in the range of $8.72-$8.97 (previously $8.60-$8.90). The Zacks Consensus Estimate for this indicator is $8.75.

How have estimates changed since then?

Over the last month, investors have seen a downward trend in estimate revisions.

VGM results

Currently, Quest Diagnostics has a Weak Growth Score of D, although it lags slightly behind its Momentum Score of F. However, the stock is rated a B for Value, putting it in the top 40% for Value for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Quest Diagnostics carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research