Quest Diagnostics Upgraded to Neutral - Analyst Blog
May 10 2013 - 9:50AM
Zacks
On May 9, we upgraded Quest
Diagnostics (DGX), a leading player in the diagnostic
testing market, to Neutral. In spite of disappointing first-quarter
2013 results, we are optimistic about the company’s recently
adopted restructuring initiative as well as its focus on high
potential areas such as core diagnostic information services.
Why the
Upgrade?
Quest Diagnostics reported dismal
results for the first quarter of 2013, missing the Zacks Consensus
Estimate on both lines. Adjusted earnings per share (EPS) were 89
cents, down 15.3% year over year.Sales declined 6.4%, with a 6.7%
drop in diagnostic information services revenues. The current
market environment remained challenging in the form of commercial
pricing pressures and Medicare cuts. We are also concerned with the
overall soft industry trends leading to volume pressure. This was
reflected in the conservative 2013 outlook.
However, the weak performance in
the quarter has not deterred Quest Diagnostics’ focus on areas with
high potential such as gene-based esoteric testing for cancer,
cardiovascular disease, infectious disease and neurological
disorders. As a part of this strategy, earlier in Apr 13, Quest
completed the divesture of HemoCue diagnostics products business.
Moreover, last December, the company shed its OralDNA Labs
salivary-diagnostics business in order to refocus its resources
toward core diagnostic information services. We also hold a
favorable view regarding Quest Diagnostics’ recently implemented
major organizational restructuring in order to increase operational
efficiency and restore growth. We assume all these endeavors could
very well turn around the company’s fortunes going ahead. The
company now carries a Zacks Rank #3 (Hold).
Med-Tech Stocks That
Warrant a Look
While we prefer to avoid Quest
Diagnostics until we see signs of improvement in the company's
performance, other medical device stocks worth a look are
Conceptus, Inc. (CPTS), VCA Antech
Inc. (WOOF) and HEALTHSOUTH Corp. (HLS).
All are Zacks Rank #1 (Strong Buy) stocks.
CONCEPTUS INC (CPTS): Free Stock Analysis Report
QUEST DIAGNOSTC (DGX): Free Stock Analysis Report
HEALTHSOUTH CP (HLS): Free Stock Analysis Report
VCA ANTECH INC (WOOF): Free Stock Analysis Report
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