On Jan 13, Zacks Investment Research upgraded Quest Diagnostics Inc. (DGX) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Of late, Quest Diagnostics has been witnessing rising earnings estimates on the back of healthy third-quarter 2014 results. Incidentally, the company had delivered a positive earnings surprise of 1.85% in the last reported quarter. The long-term expected earnings growth rate for the stock is 10.4%.
Quest Diagnostics reported better-than-expected third-quarter 2014 results. Adjusted earnings per share (EPS) from continuing operations of $1.10 exceeded the Zacks Consensus Estimate by a couple of cents and the year-ago number by 7.8%. Likewise, revenues from continuing operations were up 6.5% year over year at $1.90 billion, beating the Zacks Consensus Estimate of $1.88 billion. Volume (measured by the number of requisitions) increased 7.8% year over year as recent acquisitions by the company added 8% to revenues.
Moreover, a revision in EPS and revenue guidance indicates the fact that the company expects industry trends to likely improve in the near future. We also hold a favorable view on the company’s massive organizational restructuring strategy, implemented since Jan 2013, to increase operational efficiency and restore growth.
In addition, management is optimistic about long-term growth at the company. It anticipates that the healthcare market will benefit from continuous population growth and favorable demographics, along with expected growth in esoteric testing. This, in turn, should provide Quest Diagnostics significant opportunity to emerge as a leading high-quality, low-cost provider of diagnostic information services.
The Zacks Consensus Estimate for 2014 earnings increased 8.1%% to $4.06 per share over the last 90 days. For 2015, the estimate rose 1.8% to $4.42 per share over the same time frame.
Other Stocks to Consider
In the similar sector, Amedisys Inc. (AMED),Gentiva Health Services Inc. (GTIV) and PharMerica Corp. (PMC) are also performing well. All the three stocks sport a Zacks Rank #2 (Buy).
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