It has been about a month since the last earnings report for Quest Diagnostics (DGX). Shares have added about 3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Quest Diagnostics due for a pullback? 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 important catalysts.
Quest Diagnostics Posts Earnings Beat, Revenue Per Requisition Falls in Q1
Quest Diagnostics first-quarter 2019 adjusted earnings per share (EPS) of $1.40 exceeded the Zacks Consensus Estimate by 2.9%. However, adjusted earnings declined 7.9% from the year-ago number.
Reported EPS came in at $1.20, down 5.5% from the year-ago quarter.
Reported revenues in the first quarter inched up 0.4% year over year to $1.89 billion and also edged past the Zacks Consensus Estimate by 0.5%.
Quarterly Details
Volumes (measured by the number of requisitions) expanded 3.6% year over year in the first quarter (up 2.4% organically). However, revenue per requisition dipped 3%. Diagnostic information services revenues in the quarter were up 0.5% on a year-over-year basis to $1.81 billion.
Cost of services during the reported quarter was $1.24 billion, up 1.5% year over year. Gross margin came in at 34.2%, reflecting a 71-basis point (bps) contraction year over year.
Selling, general and administrative expenses increased 5.8% to $384 million in the quarter under review. Yet, adjusted operating margin showed a decline of 122 bps to 14.4%.
Quest Diagnostics exited the quarter with cash and cash equivalents of $464 million compared with $135 million at the end of 2018. Net cash provided by operating activities was $275 million in the first quarter compared with $180 million a year ago.
In the first quarter, the company repurchased 0.6 million shares of the common stock for $50 million. As of Mar 31, 2019, Quest Diagnostics was left with $0.5 billion of authorization under the approved share buyback plan.
Guidance Intact
Quest Diagnostics has reiterated its 2019 outlook. Excluding the impact of amortization expense, adjusted EPS for the full year is projected to be more than $6.40. The Zacks Consensus Estimate for the metric is pegged at $6.44.
Revenues for 2019 are still estimated in the band of $7.60-$7.75 billion (indicative of roughly 1-3% annualized growth). The current Zacks Consensus Estimate for revenues of $7.69 billion falls within the company’s projected range.
Operating cash flow for 2019 is expected at around $1.3 billion. The current estimate for capital expenditure sticks to the forecast bracket of $350-$400 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Quest Diagnostics has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Quest Diagnostics has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Quest Diagnostics Incorporated (NYSE:DGX): Free Stock Analysis Report
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