Leading diagnostics company, Quest Diagnostics (DGX) is scheduled to speak at a healthcare conference in Miami. There, the company will reaffirm its guidance for 2011 which is revenue growth of 1% with EPS of $4.25 to $4.45 in 2011.
Earlier, in February 2011, the largest shareholder of Quest, GlaxoSmithKline (GSK), decided to sell its entire holding of 30.75 million shares in two forms–a secondary public offering and the other through repurchase of shares by Quest. With its decision to buyback 15.37 million shares, Quest raised its 2011 adjusted EPS guidance to $4.25 to $4.45 from the previous level of $4.10-$4.30.
Quest Diagnostics performs several types of tests: routine (bodily health tests like blood cell count, HIV, and pregnancy), anatomic pathology, gene based and esoteric testing (including genetics, immunology, oncology and serology, requiring sophisticated technology) and drugs-of-abuse testing, which accounted for approximately 53%, 14%, 22% and 2%, respectively, of 2009 total revenue. In addition, the company generated 9% of its revenues in 2010 from non-clinical testing businesses which include risk assessment services for the life insurance industry, clinical trials testing, diagnostic products and healthcare information technology.
After several quarters of declining clinical testing volume, the positive 0.1% growth during the fourth quarter is encouraging. Following the renewal of majority of contracts during the second quarter, the company has witnessed stability in revenue per requisition. Moreover, physician office visit is not expected to change significantly from the current level thereby attaining stability. Although volume will continue to remain under pressure in the near future, the company’s strong focus combined with positive long-term demographic trendsshould help it remain as one of the leading players in the diagnostic industry.
We are currently ‘Neutral’ on the stock, which also corresponds to a Zacks #3 Rank (hold) in the short term.
QUEST DIAGNOSTC (DGX): Free Stock Analysis Report
GLAXOSMITHKLINE (GSK): Free Stock Analysis Report
Zacks Investment Research
