Quest Diagnostics Q1 Earnings Surpass Expectations; COVID-19 Testing Revenues Slump 80%

Quest Diagnostics Inc DGX posted Q1 FY23 adjusted EPS of $2.04, down 36.6% Y/Y, beating the consensus of $1.97.
Sales came in at $2.33 billion, a decline of 10.7% Y/Y, higher than the Wall Street estimate of $2.20 billion. Base business revenues rose 10.0%, driven by solid performance across physician and hospital customers.
COVID-19 testing revenues slumped 80.2% to $119 million.
Adjusted operating margin contracted 620 basis points to 15% from 21.2% a year ago.
Quest Diagnostics revealed its plans to acquire Haystack Oncology, an early-stage oncology company focused on minimal residual disease (MRD) testing. With the acquisition, Quest Diagnostics will add sensitive liquid biopsy technology to the oncology portfolio to improve personalized cancer care. Quest Diagnostics will pay $300 million in cash at closing and up to an additional $150 million on achieving future performance milestones.
Jim Davis, Chairman, CEO and President, said, "Our updated guidance reflects continued strong performance in our base business, offset by faster than expected declines in Covid-19 revenues and modest dilution from our planned acquisition of Haystack."
Outlook: Quest Diagnostics revised its FY23 guidance.
For FY23, the company expects sales of $8.93 billion-$9.08 billion, compared to previous guidance of $8.83 billion-$9.03 billion. The FY23 consensus for sales is pegged at $8.98 billion.
The company anticipates COVID-19 testing revenues of $150 million-$200 million versus the prior forecast of $175 million-$275 million.
The company forecasts an adjusted EPS of $8.45-$8.95, compared to $8.40 - $9.00 expected earlier and the consensus of $8.71.
Price Action: DGX shares are trading lower by 3.49% at $141.72 on the last check Thursday.

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