Quest Diagnostics buys Fresenius Medical’s Shiel laboratory

Quest Diagnostics DGX recently completed the purchase of Shiel Medical Laboratory from Fresenius Medical Care AG & Co. KGaA FMS – healthcare companies dealing with kidney disease and other chronic diseases. Shiel Laboratory specifically serves the New York-New Jersey area. The latest development is expected to drive operational excellence for Quest Diagnostics in the coming quarters.

The region will now be served by Quest Diagnostics’ flagship clinical laboratory in Teterboro, New Jersey. The acquisition is expected to expand the company’s network of patient care locations in the area.

Quest Diagnostics and Fresenius Medical will now work to identify patients with early-stage chronic kidney disease using the former’s analysis of laboratory data.

Focus on acquisitions

Quest Diagnostics mergers and acquisitions are expected to be key growth drivers. The company has recently focused on driving growth and operational efficiency through acquisitions. We note that the company recently completed the purchase of laboratory services provided by Hartford HealthCare hospitals – William W. Backus Hospital and Central Connecticut Hospital.

In addition, several new forms of collaboration with hospitals and integrated delivery networks are the main growth drivers. We are also particularly optimistic about the company’s agreement with Wal-Mart Stores, Inc. WMT. The company is particularly positive about its recent agreement with PeaceHealth in the Pacific Northwest, which is expected to provide growth in 2017. Management is also optimistic about its recent acquisitions of Med Fusion and ClearPoint, which will enable growth in the diagnostics space. We are also pleased with the company’s plan to acquire Cape Cod Healthcare, a laboratory services company.

The company believes that these additional acquisitions fit well with its M&A guidelines. Quest Diagnostics’ acquisition plans are consistent with its goal of contributing 1-2% to annual revenues through acquisitions. That’s why we believe this latest buyout will expand the customer base of this leading provider of diagnostic information services.

Trending Stock Earnings and Estimates

Quest Diagnostics earns investor trust with consistently positive results. Over the past year, the company’s share price has performed better than the entire industry. Shares gained 6.6%, compared with the overall industry decline of 5.5%.

The company’s recent earnings estimate revision was encouraging. This year, over the past 30 days, one estimate has moved higher compared to no revision in the opposite direction.

Consensus earnings estimates for the year rose to $5.65 from $5.64.

Key selection

Quest Diagnostics carries a Zacks Rank #3 (Hold).

A better-rated healthcare stock is Myriad Genetics, Inc. MYGN. Notably, Myriad Genetics carries a Zacks Rank #1 (Strong Buy). You can see complete list of today’s Zacks #1 ranked stocks here.

Myriad Genetics has a long-term expected earnings growth rate of 15%. During the year, the company’s shares gained 84.5%.

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