DGX - Quest Diagnostics slips as outlook disappoints amid hit to COVID-19 test revenue

Despite reporting better than expected Q4 2022 financials, Quest Diagnostics ( NYSE: DGX ) shed ~2% in the morning hours Thursday as the company set its 2023 revenue outlook below consensus amid falling revenue linked to COVID-19 testing.

"COVID-19 testing revenues declined as expected but still exceeded $1.4 billion in 2022," Chief Executive Jim Davis noted.

The Secaucus, New Jersey-based company recorded ~$2.3B in revenue for the quarter, indicating a ~15% YoY decline as COVID-19 testing revenue plunged ~75% YoY to $184M even as base business grew ~6% YoY adding $2.2B in revenue.

For 2022, Quest ( DGX ) reported ~$10.0B in revenue with ~8% YoY decline, while COVID-19 testing revenues fell ~48% YoY to $1.5B and revenue from base business rose ~8% YoY to $8.4B.

While exceeding the consensus, Q4 adjusted diluted EPS fell ~41% YoY to $1.98 as adj. operating income plunged ~43% YoY to $330M. Full-year net income crashed ~53% YoY to $946M as adj. operating income fell ~32% YoY to $1.7B.

"In 2023, our focus is on growing our base business and increasing our efforts to drive productivity and expand margins," Davis added as the company estimated another 88% – 81% YoY decline in COVID-19 testing revenues for the year.

Quest ( DGX ) expects its adj. diluted EPS for 2023 to reach $8.40 – $9.00, in line with the $8.65 estimated by analysts. However, the company's 2023 net revenue outlook at $8.83B – $9.03B stands below $9.14B in the consensus.

Seeking Alpha contributor Biologics issued a Strong Buy rating on Quest ( DGX ) in September, disregarding any short-term hit to earnings but focusing on its compelling valuation and long-term prospects.

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