Piper Jaffray Introduces F2012 Expectations On DGX

Piper Jaffray is introducing its F2012 revenue and EPS on shares of Quest Diagnostics Inc. DGX. “We anticipate Quest to benefit from improving physician office trends exiting 2010 and into 2011 as well as progressively easier yoy comps,” Piper Jaffray writes. “We are increasing our price target to $57, based on 12x (unchanged) our F2012 (was F2011) EPS estimate of $4.71. “We are introducing our F2012 revenue expectation, which calls for top-line growth of 2.7% to $7.7B. We are modeling 50 bpts in yoy gross margin improvement to 41.7%, reflecting favorable overhead absorption from increased testing volumes. “Our estimate includes a 60 bpts yoy EBIT margin improvement to 18.7%, due to operating leverage and improvements in bad debt expense (down 10 bpts yoy to 3.7%). All in, we are modeling a 9.7% EPS increase to $4.71.” With DGX shares currently trading within 5% of its revised price target, Piper Jaffray said that it maintain its Neutral rating. Quest Diagnostics closed Wednesday at $54.09.