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Quest Diagnostics (DGX) Q1 Earnings Top Estimates, Margins Down

Quest Diagnostics Incorporated's DGX first-quarter 2023 adjusted earnings per share of $2.04 beat the Zacks Consensus Estimate by 3.6%. Adjusted earnings however plunged 36.6% from the year-ago adjusted figure.

Certain one-time expenses, like the ones related to amortization expenses, certain restructuring and integration charges and others, were excluded from the quarter’s adjusted figures.

GAAP earnings came in at $1.78 per share, plunging 39% from the year-ago reported earnings per share (EPS).

Our model projected an adjusted EPS of $1.94 for the first quarter of 2023.


Reported revenues in the first quarter declined 10.7% year over year to $2.33 billion. Revenues, however, exceeded the Zacks Consensus Estimate by 5.9%. While the company’s legacy base business saw a year-over-year improvement, COVID-19 testing revenues fell significantly in the reported quarter.

Our estimate for first-quarter revenues was $2.20 billion.

Quarterly Details

Base Business (excludes COVID-19 testing) revenues were $2.21 billion in the reported quarter, up 10% year over year. COVID-19 testing revenues nosedived 80.2% in the first quarter to $119 million.

Diagnostic information services revenues in the quarter were down 11.1% on a year-over-year basis to $2.26 billion.

Quest Diagnostics Incorporated Price, Consensus and EPS Surprise

Quest Diagnostics Incorporated Price, Consensus and EPS Surprise
Quest Diagnostics Incorporated Price, Consensus and EPS Surprise

Quest Diagnostics Incorporated price-consensus-eps-surprise-chart | Quest Diagnostics Incorporated Quote

Volumes (measured by the number of requisitions) were down 3.8% year over year in the first quarter. Revenue per requisition declined 7.7% year over year.


The cost of services during the reported quarter was $1.56 billion, down 5.2% year over year. However, gross profit declined 20.1% to $771 million. The gross margin was 33.1%, reflecting a 388-basis point (bps) contraction from the year-ago figure.

Selling, general and administrative expenses rose 3.3% to $439 million in the quarter under review. Adjusted operating margin of 14.2% represented a 644-bps contraction year over year.

Cash, Capital Structure and Solvency

Quest Diagnostics exited first-quarter 2023 with cash and cash equivalents of $175 million compared with $315 million at the end of 2022. Cumulative net cash provided by operating activities at the end of the first quarter was $94 million compared with $480 million in the year-ago period.

The company has a five-year annualized dividend growth rate of 6.85%.


Quest Diagnostics updated its full-year 2023 guidance.

Full-year net revenue estimates were raised to a new range of $8.93-$9.08 billion (from the earlier band of $8.83-$9.03 billion). The Zacks Consensus Estimate for the same is pegged at $8.96 billion.

Adjusted EPS is now expected in the range of $8.45-$8.95 (up from $8.40-$9.00 earlier). The Zacks Consensus Estimate for the metric is pegged at $8.71.

Our Take

Quest Diagnostics reported better-than-expected first-quarter 2023 earnings and revenues. However, on a year-over-year basis, the company reported a decline on both fronts due to significantly lower COVID-19 testing demand. Margin contraction was a downside too.

On a positive note, during the reported quarter, the base business registered growth and the company also ramped up investments to accelerate growth in the base business, particularly in the areas of advanced diagnostics and direct-to-consumer testing.

Zacks Rank and Key Picks

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

Some better-ranked stocks in the broader medical space are Bio-Rad Laboratories BIO, Henry Schein, Inc. HSIC and Avanos Medical, Inc. AVNS.

Bio-Rad Laboratories carrying a Zacks Rank of 2 (Buy) at present is slated to release first-quarter 2023 earnings on May 4. BIO has an earnings yield of 3.3% against the industry’s negative yield of 2.9%.

BioRad Laboratories’ earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 27.54%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Henry Schein, carrying a Zacks Rank #2, is expected to release first-quarter 2023 earnings soon. HSIC has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.

Henry Schein has gained 22.2% compared with the industry’s 19.7% rise in the past six months.

Avanos, carrying a Zacks Rank #2, is scheduled to release first-quarter 2023 earnings on May 3. AVNS has an estimated growth rate of 1.8% for 2023. AVNS earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.

Avanos has gained 46.3% compared with the industry’s 17.5% rise in the past six months.

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