Quest Pops 4.6% In Pre-Market After Lifting 2020 Sales, Profit Guidance

Shares in Quest Diagnostics Inc. are surging 4.6% in pre-market trading after the diagnostics company raised its 2020 full-year profit and sales outlook on the back of a faster recovery in testing volumes through the end of August.

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Shares are up 4.6% at $112 in Thursday’s pre-market session. Quest (DGX) now expects 2020 diluted earnings per share of $7.42 to $8.92, up from the previous forecast of $5.66 to $7.66. Adjusted EPS guidance range was lifted to $7.50 to $9 from $6.60 to $8.60 previously. The Street consensus is for EPS of $8.28.

In addition, Quest ramped up its 2020 sales guidance to a range of $8.4 billion to $8.8 billion from $8 billion to $8.6 billion, which exceeds analysts’ expectations of $8.69 billion. Furthermore, cash provided by operations is expected to to be at least $1.45 billion, up from the previous estimate of at least $1.25 billion.

Quest informed investors that since reporting second quarter results on July 23, organic testing volumes in its base business – excluding COVID-19 molecular and antibody testing and the impact of acquisitions – continued to recover faster than anticipated through the end of August.

Still, organic base testing volumes declined high single digits in July and mid-to-high single digits in August on a percentage basis versus the prior year. Meanwhile Covid-19 molecular and antibody testing volumes remain consistent with the Quest’s previous outlook, the company said.

Quest shares have dropped 12% over the past month but are now trading slightly higher than at the start of the year. The $144.29 average analyst price target implies 35% upside potential in the shares in the coming 12 months.

KeyBanc analyst Donald Hooker last month upgraded Quest to Buy from Hold with a $144 price target, saying that the company is generating earnings of about $1 per share from COVID-19 lab tests which could continue well into 2021.

“Also, patients have re-engaged with the broader healthcare system faster we had expected, resulting in a sharp recovery in DGX’s core lab testing,” Hooker said.

Overall, Wall Street analysts have a cautiously optimistic outlook on the stock. The Moderate Buy consensus is based on 5 Buys versus 3 Holds. (See Quest Diagnostics stock analysis on TipRanks).