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Quest Diagnostics Inc DGX

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Morningstar’s Analysis

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COVID-19 Tailwind Lasts Longer Than Expected for Quest; Raising Our Fair Value Estimate

Debbie S. Wang Senior Equity Analyst

Analyst Note

| Debbie S. Wang |

Quest Diagnostics delivered third-quarter results that ran slightly ahead of our expectations as demand for COVID-19 testing saw a surge thanks to the delta variant. We’ve modestly raised our fair value estimate to $140 per share, up from $130, with roughly one third of the boost coming from our expectation that declines in pandemic test volume will be somewhat more gradual than we’d originally anticipated and the remainder coming from an adjustment to the share count to reflect recent repurchase activity. While we anticipate the course of the pandemic will remain a key factor for Quest through 2022, we remain confident in the firm’s narrow economic moat. Although Quest has seen some pressure on labor and transportation costs, all competitors in this arena face the same conditions and there’s little to suggest this has diminished Quest’s cost advantage.

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Company Profile

Business Description

Quest Diagnostics is a leading independent provider of diagnostic testing, information, and services in the U.S. The company generates over 95% of its revenue through clinical testing, anatomic pathology, esoteric testing, and substance abuse testing with specimens collected at its national network of nearly 2,300 patient service centers, as well as multiple doctors offices and hospitals. The firm also runs a diagnostic solutions segment that provides clinical trials testing, risk assessment services, and information technology solutions.

500 Plaza Drive
Secaucus, NJ, 07094
T +1 973 520-2700
Sector Healthcare
Industry Diagnostics & Research
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Aggressive Growth
Employees 49,000