Will Quest Diagnostics (DGX) Miss Earnings Estimates? - Analyst Blog

Quest Diagnostics Inc. DGX is scheduled to report its first-quarter 2014 results before the opening bell on Apr 24. Last quarter, Quest Diagnostics posted a positive earnings surprise of 9.57%. Let's see how things are shaping up for this announcement.

Factors at Play

Barring the fourth quarter of 2013, Quest Diagnostics delivered negative earnings surprises in the remaining three quarters of 2013 with an average miss of 2.38%.

Quest Diagnostics is continuously witnessing challenges with testing volume. Moreover, lower healthcare utilization and reimbursement pressure from the government and other payers continue to pose threats. Concerns also include a poor 2014 revenue outlook provided earlier, indicating that the industry trend does not seem likely to improve in the near future.

Although we hold a favorable view on the company's massive organizational restructuring strategy implemented since Jan 2013 to increase operational efficiency and restore growth, near-term visibility remains poor.

Quest Diagnostics nonetheless has been focusing on high-potential areas such as gene-based esoteric testing for cancer, cardiovascular disease, infectious disease and neurological disorders.

Earnings Whispers?

Our proven model does not conclusively show that Quest Diagnostics is likely to beat earnings this quarter. It is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for Quest Diagnostics is -4.49%, since the Most Accurate estimate of $0.85 stands below the Zacks Consensus Estimate of $0.89.

Zacks Rank: AlthoughQuest Diagnostics' Zacks Rank #2 (Buy)increases the predictive power of ESP, when combined with a -4.49% ESP, it makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies having the right combination of elements, i.e., a positive Zacks Earnings ESP and a Zacks Rank #1, #2 or #3 and hence, worth a look.

Align Technology Inc. ALGN has an Earnings ESP of +13.89% and holds a Zacks Rank #1 (Strong Buy). Align is expected to report first quarter 2014 earnings on Apr 23.

Myriad Genetics Inc. MYGN has an Earnings ESP of +10.87% and holds a Zacks Rank #1 (Strong Buy). Myriad Genetics will be reporting first quarter 2014 earnings on May 6.

Cardinal Health, Inc. CAH has an Earnings ESP of +1.00% and holds a Zacks Rank #2. Cardinal Health will report third quarter fiscal 2014 earnings on May 1.