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Why Quest Diagnostics Fell Nearly 7% Today

What happened

Wednesday wasn’t a great day to be a Quest Diagnostics (NYSE:DGX) investor. The company’s shares took a nearly 7% hit “thanks” to preliminary results that clearly didn’t meet investor expectations.

So what

According to those figures, Quest was expected to post $2.74 billion in revenue for its Q4. This would represent a decline of 9%, compared to the same quarter the previous year. This occurred despite the fact that the company’s total base-testing volumes outside of its COVID-19 testing services rose 10% against the pre-pandemic Q4 2019 figure.

Medical professional storing swab sample.

Image source: Getty Images.

The disparity is explained largely by COVID testing. During Q4 2021, Quest’s volumes in that currently crucial segment actually declined year over year, although the company didn’t say by how much.

As for profitability, Quest is modeling $3.33 in non-GAAP (adjusted) per-share earnings for the quarter. This is well down from the $4.48 it earned in the previous Q4.

Interestingly, both revenue and bottom-line figures were above analyst expectations. On average, prognosticators tracking the stock were expecting $2.54 billion in revenue and $3.10 per share on the bottom line, according to data compiled by Yahoo! Finance.

Quest also proffered preliminary full-year results for 2021. These indicate the company will book around $10.79 billion on the top line, which would be an increase of 14% over the 2020 result. Net profit also seems to be pointing north, with an anticipated $14.24 in adjusted, per-share net profit (2020 result: $11.18).

Now what

Investors might be disappointed because the omicron variant started to rage during Q4. So perhaps they were expecting higher COVID testing volumes and, consequently, better revenue and profitability numbers for the quarter and the year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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