UPDATE: JMP Securities Initiates Coverage on Quest Diagnostics on Multiple Industry Headwinds
In a report published Wednesday, JMP Securities analyst J.T. Haresco initiated coverage on Quest Diagnostics (NYSE: DGX) with a Market Perform rating.
In the report, JMP Securities noted, “We are initiating coverage on Quest Diagnostics (DGX) with a Market Perform rating. DGX provides clinical laboratory services and offers access to diagnostic testing services for cancer, cardiovascular disease, infectious disease, and neurological disorders. While we favor the company's solid progress with the Invigorate cost reduction initiative and double-digit earnings growth prospect, we believe DGX faces multiple industry headwinds, including continued concerns on healthcare utilization, reimbursement pressure, and competition that, in our view, should continue to be a negative for the stock. Furthermore, we believe that the company's infrastructure is less efficient and uniform than peers; thus the company is less prepared to compete in a capitated spending environment. Shares currently trade at 1.5x EV/S and at a P/E multiple of 13x, both of which are slightly below their respective peer group averages. We believe the discount is warranted given the headwinds and that shares are fairly valued at current levels; thus, we are initiating coverage with a Market Perform rating.”
Quest Diagnostics closed on Tuesday at $53.55.
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