Quest Lifts 2020 Sales, Profit Guidance As Covid-19 Testing Picks Up

Quest Diagnostics Inc. raised its 2020 full-year profit and sales outlook as the diagnostics company said it experienced “significantly” higher COVID-19 molecular testing volumes. Shares rose 2% in Wednesday’s pre-market trading.

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Specifically, Quest (DGX) noted that since it reported its third-quarter financial performance on October 22, COVID-19 molecular testing volumes have been rising much faster than anticipated in its previous outlook. As a result, the company now expects 2020 diluted earnings per share to be at least $9.98, up from the previous outlook of $8.22-$9.22.

Adjusted diluted EPS guidance for 2020 was lifted to at least $10.75 versus the previous outlook of $9-$10. The Street consensus is for EPS of $10.01.

In addition, Quest ramped up its 2020 sales guidance to a range of least $9.35 billion compared to the previous outlook of $8.8 billion-$9.1 billion. Analysts had projected $9.11 billion for the full year.

“Organic testing volumes ordered in the company’s base business (excluding COVID-19 molecular and antibody testing and the impact of acquisitions) remained relatively steady, down mid-to-high single digits versus the prior year in October and November, consistent with the company’s previous outlook,” Quest stated.

Meanwhile, cash provided by operations for 2020 is forecasted to be at least $1.95 billion, up from the previous outlook of at least $1.75 billion.

Quest shares have gained 17% so far this year and looking ahead, the average analyst price target of $139.40 implies 12% upside potential in the shares in the coming 12 months.

Mizuho analyst Ann Hynes recently raised the stock’s price target to $149 from $144 and reiterated a Buy rating, as the analyst believes that going forward there is more upside potential than downside risk.

Hynes noted that her valuation does not take into account any acquisition activity and share repurchase plans, which is probably conservative given the cash flow Quest is generating from COVID-19 testing.

Overall, Wall Street analysts have a cautiously optimistic outlook on the stock. The Moderate Buy consensus is based on 4 Buys versus 2 Holds. (See Quest Diagnostics stock analysis on TipRanks).