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Quest Diagnostics to Buy Shiel to Widen Footprint in NY-NJ

Zacks Equity Research
Updated

On an inorganic expansion spree, Quest Diagnostics Incorporated DGX has recently entered into yet another acquisition agreement. The company has decided to purchase Fresenius Medical Care’s medical laboratory business, Shiel.

Although financial terms of the deal have been kept under wraps, Quest Diagnostics expects the deal to close in the fourth quarter of 2017, subject to customary regulatory approvals.

Notably, Shiel is a clinical laboratory provider of Fresenius Medical Care, a premier healthcare company particularly working on renal and other chronic conditions in patients. The lab specifically serves in the New York-New Jersey metropolitan area.

Per Quest Diagnostics, post completion of the buyout, Shiel will provide broader access to the company’s diagnostic insights and innovations for physicians and patients in the New York-New Jersey region. The takeover is expected to expand Quest Diagnostics’ patient service centers network in the region.

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Additionally, care providers will have direct access to Quest Diagnostics’ broader menu of services. The ones currently provided by Shiel’s laboratories in Rockleigh, NJ and Brooklyn, NY, will now shift to the company’s flagship clinical laboratory in Teterboro, NJ.

Quest Diagnostics and Fresenius Medical Care will jointly work on identifying patients with early-stage chronic kidney disease, with potential to benefit from treatment to slow progression to end-stage renal disease (ESRD), based on the former’s laboratory data analytics.

Quest Diagnostics’ merger and acquisition activity is believed to be a key growth driver, functioning in full swing. Notably, the company has been of late focusing on tactics to accelerate growth and drive operational excellence through strategically aligned, accretive acquisitions. Worth reckoning is the company’s recent consolidation with an outreach operation of PeaceHealth Laboratories.

Per the company, these tuck-in acquisitions fit well within the ambit of M&A guidelines. Quest Diagnostics’ takeover plans are consistent with its goal of contributing 1-2% revenue growth annually through accretive acquisitions.

Quest Diagnostics Incorporated Price

Quest Diagnostics Incorporated Price | Quest Diagnostics Incorporated Quote

Year to date, the company has outperformed the broader industry.  Per the last share price movement, the stock has gained 1.9% in contrast to the broader industry’s 3.9% decline during the period.

Zacks Rank & Key Picks

Quest Diagnostics carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the medical sector are Orthofix International N.V. OFIX, Owens & Minor, Inc. OMI and OraSure Technologies, Inc. OSUR. While both Orthofix International and Owens & Minorsport a Zacks Rank #1 (Strong Buy), OraSure Technologies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Orthofix International has a long-term expected earnings growth rate of 11.8%. The stock has gained roughly 3% over the last three months.

Owens & Minorhas a long-term expected earnings growth rate of 5%. The stock has gained 4.4% over the last month.

OraSure Technologies has a long-term expected earnings growth rate of 16%. The stock has gained 9.1% over the last month.

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