Shares of Quest Diagnostics were upgraded to Buy, the target increased due to the higher trends used by Investing.com
On Tuesday, CFRA analyst Paige Meyer raised the rating on Quest Diagnostics (NYSE: ) from Hold to Buy, increasing the price target to $178 from $155. The correction reflects the analyst’s optimism about the company’s sales growth prospects.
Meyer cites high consumption trends as a positive influence on the revised concept. The price is now set at 18.4 times the company’s 2025 earnings per share (EPS), marking a premium to Quest Diagnostics’ historical forward average.
Quest Diagnostics recently reported third-quarter earnings of $2.30 per share, beating the consensus by $0.04. Sales reached $2.5 billion, which was 3% higher than consensus estimates, with organic growth noted at 4.2%. This growth was driven by increased volumes and higher revenue per claim.
Meyer adjusted the company’s EPS estimates, raising the 2024 forecast by $0.03 to $8.89 and the 2025 forecast by $0.18 to $9.67.
The company also revised its 2024 EPS guidance up $0.05 to $8.90 at midpoint. This revision is due in part to higher top-line contributions expected from the acquisition of LifeLabs, although slightly offset by the financial impacts of Hurricane Milton, which were estimated at $0.08 per share.
Despite these changes, Meyer expects the company’s revenue growth to be around 3% through 2025, assuming consumption trends remain strong.
In 2024, Quest Diagnostics completed eight acquisitions, and the analyst predicts that this will enable the company to exceed its revenue growth target of 1% to 2% from acquisitions in 2025. Nevertheless, Meyer expects that Quest Diagnostics will return to this level of growth in 2026. The acquisition and the revised guidance indicate a strategic approach to the growth and expansion of the company’s healthcare diagnostics market.
In other recent news, Quest Diagnostics delivered strong third-quarter results, beating analyst expectations for both revenue and profit. The diagnostic testing company posted adjusted earnings per share of $2.30, beating the consensus estimate of $2.26. Revenue rose 8.5% year over year to $2.49 billion, beating analysts’ estimates of $2.43 billion.
The company’s performance was driven by new customer acquisitions, business expansion with physicians and hospitals, and recent acquisitions, including LifeLabs. As a result of these developments, Quest raised its full-year revenue guidance to $9.80 billion to $9.85 billion, from an earlier forecast of $9.50 billion to $9.58 billion. However, this revised estimate falls short of the $9.657 billion that analysts were expecting.
Despite this, the company maintained its adjusted EPS guidance of $8.85 to $8.95. The demand includes an improved revenue outlook from contributions from recent acquisitions and expressed confidence in its ability to drive revenue growth and acquisitions through 2025.
InvestingPro Insights
Quest Diagnostics’ recent performance and strategic moves coincide with several key insights from InvestingPro. The company’s market cap is $17.56 billion, indicating its significant presence in the health diagnostics sector.
The InvestingPro tip highlights that Quest Diagnostics has maintained dividend payouts for 21 consecutive years, demonstrating a commitment to shareholder returns consistent with a growth strategy. This is also supported by a current dividend yield of 2.04% and a dividend growth rate of 5.63% over the last twelve months.
The company’s P/E ratio of 21.04 and adjusted P/E ratio of 19.71 over the past twelve months suggest that investors are willing to pay a premium for Quest’s earnings, likely due to its strong market position and growth prospects. This is consistent with the improved CFRA outlook and target price increases.
Quest’s revenue for the last twelve months was $9.346 billion, with quarterly revenue growth of 2.52% in Q2 2024. This growth, although small, supports analyst optimism about the company’s sales growth prospects and higher consumption trends.
InvestingPro offers 13 additional Quest Diagnostics advisories, providing investors with a comprehensive analysis of the company’s financial health and market conditions. For access to these insights and more, consider exploring the full range of data available on InvestingPro.
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