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Earnings Beat: Quest Diagnostics Incorporated Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Simply Wall St
·4-min read

As you might know, Quest Diagnostics Incorporated (NYSE:DGX) just kicked off its latest third-quarter results with some very strong numbers. It was overall a positive result, with revenues beating expectations by 2.9% to hit US$2.8b. Quest Diagnostics reported statutory earnings per share (EPS) US$4.14, which was a notable 12% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Quest Diagnostics

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earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Quest Diagnostics' 15 analysts is for revenues of US$9.18b in 2021, which would reflect a notable 9.8% increase on its sales over the past 12 months. Per-share earnings are expected to soar 44% to US$8.06. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$8.76b and earnings per share (EPS) of US$7.68 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$141, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Quest Diagnostics, with the most bullish analyst valuing it at US$151 and the most bearish at US$124 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Quest Diagnostics' past performance and to peers in the same industry. It's clear from the latest estimates that Quest Diagnostics' rate of growth is expected to accelerate meaningfully, with the forecast 9.8% revenue growth noticeably faster than its historical growth of 1.0%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 6.9% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Quest Diagnostics to grow faster than the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Quest Diagnostics' earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. The consensus price target held steady at US$141, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Quest Diagnostics going out to 2024, and you can see them free on our platform here.

Even so, be aware that Quest Diagnostics is showing 3 warning signs in our investment analysis , and 1 of those is significant...

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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