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Argus Upgrades Quest Diagnostics, Cites Several Key Catalysts

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Argus Upgrades Quest Diagnostics, Cites Several Key Catalysts
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Quest Diagnostics Inc (NYSE: DGX) has a number of bullish catalysts on the horizon, enough for one Wall Street analyst to upgrade the stock.

The Analyst

Argus analyst Jasper Hellweg upgraded Quest from Hold to Buy and set a $116 price target for the stock.

The Thesis

Quest simply has too strong of a cash position to ignore. Hellweg said the company has strong cash flow, is conscious of limiting costs and has been aggressive about capital return. In fact, the company recently issued an 11 percent dividend hike, its first since Q1 of 2016.

In 2017 Quest reported $1.18 billion in cash from operations, a nearly 10 percent increase from the year before.

In coming quarters, Hellweg said Quest will also begin to benefit from both a lower tax rate and its handful of recent acquisitions.

In addition to the upgrade, Argus raised its 2018 EPS forecast from $5.79 to $6.59 and set a 2018 EPS target of $6.91. Hellweg said investors should keep a close eye on changed to Medicaid payments for lab fees in 2019, which could potentially limit earnings growth. However, Argus still expects Quest to be able to deliver long-term earnings growth of around 7 percent.

“Although Quest may face pressure from lower Medicaid payment rates for clinical laboratory tests, we expect a greater impact on smaller peers, which may lead to additional acquisition opportunities,” Hellweg said.

Price Action

Quest opened Wednesday’s session down 0.6 percent and is now up 5.5 percent year-to-date.

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Latest Ratings for DGX

DateFirmActionFromTo
Jun 2018William BlairUpgradesMarket PerformOutperform
May 2018Morgan StanleyUpgradesEqual-WeightOverweight
May 2018Credit SuisseMaintainsOutperformOutperform

View More Analyst Ratings for DGX
View the Latest Analyst Ratings

Posted-In: Argus Jasper HellwegAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

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