Quest Diagnostic Stock is Ready to Move Higher

Medical diagnostic lab company Quest Diagnostic NYSE: DGX stock has been performing relatively stronger than the benchmark indices down only (-20%) on the year. The Company was a benefactor of the pandemic processing COVID test results, but volumes are falling as COVID wanes amidst mass vaccinations and boosters. PCR testing accounted for nearly $600 million in revenues, down (-28%) with nearly 60% occurring during the Omicron surge. That portion of revenues are expected to decline into 2023. However, it’s direct-to-consumer (DTC) business doubled in the quarter. The well-known lab serves nearly half of all the hospitals and physicians in the U.S. Processing over 1.8 million medical tests daily has enabled the Company to gather massive amounts of robust patient data. The Company shares a duopoly in the space with rival LabCorp NYSE: LH. Despite inflationary pressures and revenue slip, Quest is making a strong recovery and raised it fiscal full-year 2022 top and bottom line guidance. Prudent investors looking for a defensive healthcare play in an established duopoly can look for opportunistic pullbacks in shares of Quest Diagnostic.

Q1 Fiscal 2022 Earnings Release

On April 21, 2022, Quest released its fiscal first-quarter 2022 results for the quarter ending March 2022. The Company reported an adjusted earnings-per-share (EPS) profit of $3.22 excluding non-recurring items versus consensus analyst estimates for a profit of $3.00, beating estimates by $0.22. Revenues fell (-4%) year-over-year (YOY) to $2.61 billion, missing analyst estimates for $2.64 billion. Quest CEO Steve Rusckowski commented, "COVID-19 volumes remained strong early in the quarter and decreased in February and March, in line with the market. We continue to make investments to further accelerate growth in the base business, while our efforts to improve productivity are helping us to offset inflationary pressures. Based on our strong performance in the quarter and our expectations for the remainder of 2022 we have raised our full year guidance."    

Raised Guidance

Quest issued fiscal full-year EPS guidance between $9.00 to $9.50 versus $8.98 consensus analyst estimates and previous guidance range of $8.65 to $9.35. Revenues are expected between $9.2 billion to $9.5 billion versus $9.35 billion consensus analyst estimates and prior guidance between $9 billion to $9.5 billion.

Conference Call Takeaways

CEO Rusckowski talked up the recovery on the $2.6 billion in total revenues. Due to the COVID emergency extension into July, the Company raised its COVID revenue guidance to come in between $850 million to $1 billion. The Company continues to make inroads with its overall base business with health plans and gaining market share. Health plans revenues grew faster than its overall base business in the quarter with deepening relationships through value based contracting. Nearly 30% of its health plans tie performance and reimbursement to value based elements like patient health quality, outcomes, and shares savings. He sees this growing to 50% in the coming years. He added, “We continue to make investments to accelerate growth in oncology, hematology, hereditary genetics, genomic sequencing services, and power services. Since we’ve ramped up our investments, and our advanced diagnostics portfolio, we have already accelerated growth by several 100 basis points and expect to deliver the 8% growth earlier than 2024, which we committed to at our 2021 Investor Day.”

DGX Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for DGX stock. The weekly rifle chart peaked near the $146.03 Fibonacci (fib) level before selling back down to bottom off the $125.67 fib. The weekly rifle chart has been chopping flat but is attempting a breakdown as the weekly 5-period MA at $136.90 crosses down through the 15-period MA at 137.73. The weekly lower Bollinger Bands (BBs) sit near the $125.67 fib level. The weekly 50-period MA sits at $144.26. The weekly stochastic crossed down through the 60-band. The weekly market structure low (MSL) buy triggers on the $138.15 breakout. The daily rifle chart downtrend is slowing down as the 5-period MA flattens at $128.45 with a 15-period MA falling at $134.50 and 50-period MA at $136.40. The daily lower BBs sit at $122.20. The daily 200-period MA sits at $144.03 and upper daily BBs sit at $149.87. The daily stochastic crossed up with a mini pup towards the 20-band. Prudent investors can watch for opportunistic pullback levels at the $125.67 fib, $121.55 fib, $118.14 fib, $115.60 level, $112.46 fib, and the $108.44 fib level. Upside trajectories range from the $146.03 fib level up towards the $164.22 fib level.