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MARKETS LIVE BLOG:

S&P 500 SLIPS BELOW 5,000; NASDAQ SINKS ON TECH DRAG

Nvidia tumbles 10%, Amazon loses more than 2% while Apple ends 1% lower

Quest Diagnostics (DGX) Q4 Earnings in Line, Margins Down

Zacks Equity Research

Quest Diagnostics Incorporated’s DGX fourth-quarter 2018 adjusted earnings per share (EPS) of $1.36 were on par with the Zacks Consensus Estimate. Adjusted earnings declined 1.4% from the year-ago number.

Reported EPS came in at 92 cents, reflecting a 49.5% decline from the year-ago quarter.

Adjusted earnings for the full year came in at $6.31 per share, a 16.9% improvement from the year-ago period. However, it lagged the Zacks Consensus Estimate of earnings of $6.33 per share.

Reported revenues in the fourth quarter were down 1.4% year over year to $1.84 billion and also missed the Zacks Consensus Estimate by 2.4%.

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For 2018, the company registered revenues of $7.53 billion, up 1.7% from 2017. This however lagged the Zacks Consensus Estimate of $7.77 billion.

Quarterly Details

Volumes (measured by the number of requisitions) increased 3.4% year over year in the fourth quarter. However, revenue per requisition was down 5.5%. Diagnostic information services revenues in the quarter dropped 1.5% on a year-over-year basis to $1.76 billion.

Cost of services during the reported quarter was $1.24 billion, up 3.4% year over year. Gross margin came in at 32.8%, reflecting a 313-basis point (bps) contraction year over year.

Quest Diagnostics Incorporated Price, Consensus and EPS Surprise

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

Selling, general and administrative expenses declined 6.8% to $356 million in the reported quarter. Yet, adjusted operating margin showed a contraction of 201 bps to 13.5%.

Quest Diagnostics exited 2018 with cash and cash equivalents of $135 million, compared to $137 million at the end of 2017. Net cash provided by operating activities was $1.20 billion for 2018, compared with $1.17 billion in the year-ago quarter.

In the fourth quarter, the company repurchased 2 million shares of the common stock for $175 million. In the full year, the company repurchased 3.4 million shares for $325 million. As of Dec 31, 2018, Quest Diagnostics was left with $0.6 billion of authorization under the approved share repurchase plan.

Guidance Tweaked

Quest Diagnostics has provided its 2019 guidance. Excluding the impact of amortization expense, adjusted EPS for the full year is projected to be over $6.40. The Zacks Consensus Estimate is pegged at $6.59.

Revenues for 2019 are estimated in the band of $7.60 billion to $7.75 billion (annualized growth of roughly 1% to 3%). The current Zacks Consensus Estimate for revenues of $7.77 billion, exceeds the company’s projected figure.

Operating cash flow for 2019 is expected at around $1.3 billion. The current estimate for capital expenditure remains within the range of $350 million to $400 million.

Our Take

Quest Diagnostics exited the fourth quarter 2018 on a sluggish note with in-line earnings and revenues missing the Zacks Consensus Estimate. The year-over-year decline in Diagnostic information services revenues was also disappointing.

In the last couple of years, Quest Diagnostics has faced several reimbursement issues which have hurt revenues.

The company is currently refocusing on its core diagnostic information services business and working on disciplined capital deployment. According to Quest Diagnostics, its guidance for 2019 reflects significant reimbursement pressure offset by strong volume growth and continued execution of Invigorate program.

Zacks Rank & Key Picks

Quest Diagnostics currently carries a Zacks Rank #3 (Hold). A few better-ranked medical stocks are Abbott Laboratories ABT, AngioDynamics Inc. ANGO and CONMED, Corp. CNMD.

Abbott reported fourth-quarter 2018 adjusted EPS of 81 cents, in line with the Zacks Consensus Estimate. Revenues of $7.77 billion were below the Zacks Consensus Estimate of $7.79 billion. The stock has a Zacks Rank #2 (Buy).

AngioDynamics’ fiscal second-quarter adjusted EPS of 22 cents exceeded the Zacks Consensus Estimate by a penny. Revenues totaled $91.5 million, beating the consensus estimate by 2.9%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CONMED delivered fourth-quarter adjusted EPS of 73 cents, in line with the Zacks Consensus Estimate. Revenues of $242.4 million beat the Zacks Consensus Estimate of $229.2 million. The stock carries a Zacks Rank of 2.

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Abbott Laboratories (ABT) : Free Stock Analysis Report
 
AngioDynamics, Inc. (ANGO) : Free Stock Analysis Report
 
Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report
 
CONMED Corporation (CNMD) : Free Stock Analysis Report
 
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