Quest Diagnostics Stock to Gain From Innovation Amid Industry Threats

Quest Diagnostics DGX is gaining from advanced diagnostics offerings and strategic acquisitions. Rising debts and industry challenges continue to dent growth. The stock carries a Zacks Rank #3 (Hold).Factors Driving DGX StockQuest Diagnostics’ growth in the Physician Lab Services is backed by new customer wins, growing utilization of the company’s Advanced Diagnostics portfolio and contributions from acquisitions. The ongoing strength in healthcare utilization boosted growth throughout 2024. Quest Diagnostics continues to experience strong volume and revenue growth through its high-quality, low-cost testing options in Medicare Advantage plans. The company’s strategic partnerships with Elevance Health and Sentara Health Plans position it to expand its reach further and capitalize on these dynamic trends. Quest Diagnostics is investing in advanced diagnostics to deliver and scale innovative services that improve patient care and drive growth. These highly specialized services include molecular genomics and oncology tests, such as germline testing to assess prenatal and hereditary genetic risks and somatic testing for tumor sequencing. As the portfolio of advanced diagnostics continues to grow, their increasing adoption is driving a favorable test mix and growth in test per requisition for the company. Throughout 2024, the company consistently generated double-digit revenue growth across several clinical areas.Within brain health, the robust demand for AD-detect blood tests for assessing Alzheimer's disease risk drove solid growth in the fourth quarter of 2024. Quest Diagnostics plans to expand its portfolio with new biomarkers to help providers better assess Alzheimer's and other forms of dementia. Growth in women's health was driven largely by prenatal and hereditary genetic testing, consistent with the recent quarters. The company saw a robust uptake of self-collection options for genital tract infection testing in the quarter.Quest Diagnostics’ strategy includes generating growth through value-creating and strategically aligned acquisitions using disciplined investment criteria. During the fourth quarter of 2024, Quest Diagnostics completed the acquisition of outreach lab assets from Ohio Health and University Hospitals, two leading non-profit health systems in Ohio. This year, the company plans to moderate its acquisition pace and focus on driving growth from these completed transactions.Quest Diagnostics Incorporated Price Quest Diagnostics Incorporated price | Quest Diagnostics Incorporated QuoteThe stock has gained 9.2% in the past six months compared with the industry’s 5.2% rise. With the company currently focusing on core business expansion through innovations, new offerings and new customer wins, we expect the stock to continue its upward movement in the coming days.Major Downsides for DGXAmid the evolution of the healthcare industry, the company’s operations are exposed to several inherent risks, such as fluctuations in healthcare utilization rate, softer testing volumes, commercial pricing pressure and reimbursement headwinds. Healthcare market participants, including governments, are focused on controlling costs and have adopted several cost-control approaches, including reducing reimbursement for healthcare services, changing reimbursement methodology for healthcare services, and changing medical coverage policies denying coverage for services. This pressure to control healthcare costs also poses a challenge to the company.Besides, the clinical testing industry is subject to seasonal fluctuations. Typically, testing volume declines during vacation and major holiday periods, reducing net revenues and operating cash flows below annual averages. Factors such as severe weather or other events (such as public health emergencies and health pandemics) can deter patients from going for tests, varying in duration and severity from year to year. Additionally, clinical testing orders generated from clinician offices, hospitals, employers and consumers can be affected by changes in the United States economy and regulatory environment.The company’s solvency level remains a concern. At the end of the fourth quarter of 2024, long-term debt on the balance sheet was $5.62 billion, while the cash and cash equivalent balance was only $549 million. The current portion of the debt was much higher at $602 million. Moreover, a higher debt level induces higher interest payments, which comes along with the risk of failure to pay the same. The times interest ratio, which indicates the company’s capacity to pay interest, declined 0.5% sequentially to 6.8%.Key PicksSome better-ranked stocks in the broader medical space are Cardinal Health, Inc. CAH, ResMed Inc. RMD and Alphatec ATEC.Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.64%. Its shares have risen 27.2% compared with the industry’s 5.6% growth in the past six months.ResMed, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 16%. RMD’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.86%.ResMed’s shares have gained 11.5% compared with the industry’s 15.4% growth in the past six months.Alphatec, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 40% for 2025. ATEC’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.6%.Alphatec’s shares have rallied 46.4% compared with the industry’s 8.8% growth in the past six months.Just Released: Zacks Top 10 Stocks for 2025Hurry – you can still get in early on our 10 top tickers for 2025. Handpicked by Zacks Director of Research Sheraz Mian, this portfolio has been stunningly and consistently successful. From inception in 2012 through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Sheraz has combed through 4,400 companies covered by the Zacks Rank and handpicked the best 10 to buy and hold in 2025. You can still be among the first to see these just-released stocks with enormous potential. See New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report Cardinal Health, Inc. (CAH): Free Stock Analysis Report ResMed Inc. (RMD): Free Stock Analysis Report Alphatec Holdings, Inc. (ATEC): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks