Quest Diagnostics Wins Big In The Business Of COVID

Quest Diagnostics Is On The Front Line Of COVID Testing

Quest Diagnostics (NYSE:DGX) was very well positioned for the pandemic. As a leading provider of medical testing services, supplies, and resources it is on the front line of the pandemic. Over the past almost1-12 months the company has been reaping the rewards of being in the right place at the right time with the right product. COVID testing. COVID testing continues to rage unabated through the global economy and will continue to do so for quite some time. As much as we wish for the pandemic to be over, we think this company’s business is in no danger of flagging soon.

"In a year dominated by the pandemic, Quest brought critical COVID-19 testing to our country, and delivered record revenues, earnings, and cash from operations for the fourth quarter and full year 2020," said Steve Rusckowski, Chairman, CEO and President. "Declines in our base business recovered rapidly throughout the summer and fall; however the recovery stalled at the end of November and into December due to the surge in COVID-19 infections across the country. Continued high demand for COVID-19 testing drove our performance through the second half of the year.”

Quest Diagnostics Business Accelerates In the 4th Quarter

Quest Diagnostics wrapped up a strong year with Q4 revenue that not only accelerated from the previous quarter but from the previous year. The $3.002 billion in net revenue is up 55.4% versus the 42.43% acceleration posted in the 2nd quarter and beat the consensus by 270 basis points. This brings the company’s full-year revenue up to $9.44 billion and up 22.15% from 2019.

Moving down the report the company displays an increasing amount of earnings leverage. The company’s net income is up 129% which, when combined with repurchases, has adjusted EPS up 168%. On a GAAP basis, EPS is up a slightly less-strong 126% with both GAAP and adjusted earnings beating the consensus targets. On a full-year basis, the company’s cash from operations is up 61.3% with momentum expected to continue in the 2021 period.

"The pandemic has tested our nearly 50,000 employees and they have responded as heroes, by developing COVID-19 tests, building test capacity, innovating new testing models with our retail partners, transporting specimens, delivering results and of course, supporting our customers. I'm proud of what we have achieved and optimistic about what we can accomplish in 2021."

Looking forward, the company is expecting to see considerable strength in 2021 although it refrained from giving a full-year guidance update. What management delivered instead is a forecast for the first half of the year that came in well above the mid-point of the consensus figures. The company is expecting revenue in the range of $4.85 to $5.15 billion in revenue which implies a 2.75% YOY increase when annualized, and that is at the low end of the estimate. As for earnings, the half-year forecast $5.07 to $6.07 versus the $5.41 implied by the analysts.

The Technical Outlook: Shares Of DGX Fall After Earnings

Shares of Quest Diagnostics fell in the wake of the Q4 report because the market sees Q4 2020 as the peak of growth. Without another pandemic to spur growth, the comps are going to get tougher and tougher even as the need for testing dwindles and that is ultimately a bad thing for a market bent on growth.. The next targets for support are near $120 and $117.50, if those don't hold a move to much lower price handles is likely on the way.