Quest Diagnostics (DGX) Hits A 52-Week High: What's Driving The Stock?

On Jan 28, shares of Quest Diagnostics (NYSE:DGX) scaled a new 52-week high of $110.99, closing the session marginally lower at $110.82. In fact, the stock has rallied nearly 10.5% since its third-quarter earnings announcement on Oct 22, 2019.

Expanded long-term partnership with UnitedHealthcare, robust performance by the diagnostic information services wing and impressive full-year guidance have prompted the rally.

Let’s take a closer look at what's working in favor.

Q4 Revenues Likely to be Strong

Despite PAMA reimbursement pressure weighing on the diagnostic testing industry, in the fourth quarter, the company is expected to have fulfilled all five elements of its growth acceleration strategy, just like in the last few quarters. Investors seem to be optimistic about this momentum getting reflected in the upcoming quarterly results, scheduled to be released on Jan 30.

In this regard, in the to-be-reported quarter, the company acquired Clinical Laboratory Services of Boston Clinical Laboratories in Massachusetts, NJ. This transaction is expected to prove immediately accretive to the top line.

Revenues for 2019 were earlier estimated at $7.72 billion. This indicates 2.5% growth from the year-ago reported figure.

Other Encouraging Factors

In January 2020, Quest Diagnostics acquired select assets of Memorial Hermann Health System to broaden its line of diagnostic services. Around the same time, the company acquired Blueprint Genetics to expand its genetic testing portfolio.

Investors have been optimistic about the company’s prospects since it acquired select assets of the clinical laboratory services business of Boston Clinical Laboratories (“BCL”), a Waltham-based regional provider of laboratory services, last December.

Meanwhile, Quest Diagnostics has been having a great run on the bourses in the past year. The stock has rallied 28.6% against the broader industry’s decline of 15.6%. The company currently has a market cap of $14.75 billion.

Zacks Rank & Stocks Worth a Look

Quest Diagnostics currently carries a Zacks Rank #4 (Sell).

A few better-ranked stocks from the broader medical space are West Pharmaceutical Services (NYSE:WST) , Hill-Rom Holdings, Inc (NYSE:HRC) and HealthEquity (NASDAQ:HQY) , each currently carrying a Zacks Rank #2 (Buy).

West Pharmaceutical Services has a projected long-term earnings growth rate of 14%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hill-Rom’s long-term earnings growth rate is estimated at 11.7%.

HealthEquity has a long-term earnings growth rate of 25%.

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