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Growing Coronavirus Testing Turns Quest Diagnostics Analyst Bullish

Growing Coronavirus Testing Turns Quest Diagnostics Analyst Bullish

Quest Diagnostics Inc (NYSE: DGX)  preannounced its second-quarter revenue at around $1.83 billion on Monday, beating Street estimates by about 18%. Preliminary also came in ahead, in the range of $1.39-$1.42 per share versus the Street’s 18-cent estimate. 

The company’s second-quarter earnings were driven by a faster recovery in core testing volumes and growing COVID-19 testing services, according to BofA Securities.

The Quest Diagnostics Analyst: Derik de Bruin upgraded Quest Diagnostics from Neutral to Buy and raised the price target from $124 to $142.

The Quest Diagnostics Thesis: Coronavirus testing tailwinds are likely to last longer than was previously anticipated, de Bruin said in a Tuesday upgrade note. (See his track record here.)

The analyst named the reasons for the prolonged tailwinds as:

  • Deteriorating coronavirus situation in the U.S.
  • Uncertainties around when a vaccine can be approved
  • Doubts around herd immunity developing
  • Potential for repeated waves of the virus

“We are still skeptical on serology testing and continue to assume a lower utilization rate, but we expect molecular testing (MDx) demand and utilization should continue at a high level,” de Bruin said. 

The analyst raised the revenue estimates for fiscal 2021 and 2022 from $7.542 billion to $8.134 billion and from $8.110 billion to $8.825 billion, respectively. BofA also raised the earnings estimates for the years from $4.20 per share to $6.30 per share and from $7.60 per share to $8.40 per share, respectively.

DGX Price Action: Shares of Quest Diagnostics were trading 0.77% higher to $120.06 at last check.

Related Links:

Benzinga's Top Upgrades, Downgrades For July 14, 2020

Moderna, Other Vaccine Developers Lead The Way In New GERM ETF

Latest Ratings for DGX

Jul 2020KeyBancUpgradesSector WeightOverweight
Jul 2020Credit SuisseMaintainsNeutral
Jul 2020B of A SecuritiesUpgradesNeutralBuy

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