Quest Diagnostics Earnings Cheat Sheet: Margins Shrink on Rising Costs, Net Income Falls

S&P 500 (NYSE:SPY) component Quest Diagnostics Incorporated (NYSE:DGX) reported its results for the second quarter. Quest Diagnostics, Inc. provides diagnostic testing, information and services to patients, physicians and others.

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Quest Diagnostics Incorporated Earnings Cheat Sheet for the Second Quarter

Results: Net income for Quest Diagnostics Incorporated fell to $163.1 million ($1.02 per share) vs. $194.6 million ($1.07 per share) a year earlier. This is a decline of 16.2% from the year earlier quarter.

Revenue: Rose 1.5% to $1.9 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: DGX reported adjusted net income of $1.12 per share. By that measure, the company was about in line with expectations as the mean analyst estimate of $1.13 per share. Analysts were expecting revenue of $1.91 billion.

Quoting Management: “During the second quarter, revenues grew 1.5%, adjusted earnings per share increased 5%, and we generated strong underlying cash flow. In addition, we began the integration of Athena and Celera into Quest Diagnostics,” said Surya N. Mohapatra, Ph.D., Chairman and CEO. “Today we are announcing a comprehensive initiative to improve profitability in this competitive marketplace and better prepare us for the substantial growth opportunities in the future. This is designed to improve operations and make our company more agile and efficient. We expect to reduce our cost structure by $500 million over the next three years to help us reach our goal of 20% operating income.”

Key Stats:

Gross margin shrank 0.5 percentage point to 42%. The contraction appeared to be driven by increased costs, which rose 2.4% from the year earlier quarter while revenue rose 1.5%.

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by one cent, and in the fourth quarter of the last fiscal year, it was ahead by 7 cents.

The company’s revenue has now risen for two straight quarters. In the first quarter, revenue increased 0.9% to $1.82 billion from the year earlier quarter.

Competitors to Watch: Laboratory Corp. of America Hldgs. (NYSE:LH), Clarient, Inc. (NASDAQ:CLRT), Psychemedics Corp. (NASDAQ:PMD), Bio-Reference Laboratories, Inc. (NASDAQ:BRLI), MEDTOX Scientific, Inc. (NASDAQ:MTOX), Celera Corporation (NASDAQ:CRA), Enzo Biochem, Inc. (NYSE:ENZ), Orchid Cellmark, Inc. (NASDAQ:ORCH), Interleukin Genetics, Inc (ILIU), and RadNet Inc. (NASDAQ:RDNT).

Stock Performance: Shares of DGX are unchanged from the previous close of $58.80.

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(Source: Xignite Financials)