Zacks Investment Research

Quest Diagnostics (DGX) is scheduled to release its fourth-quarter and full-year 2012 results on Wednesday, Jan 23, 2013, before the market opens. Let’s see how things are shaping up before the announcement.

Growth Factors this Past Quarter

We remain concerned about Quest Diagnostics as it is continuously witnessing challenges with testing volume. Moreover, reimbursement pressure from the government and other payers continue. However, following the divestment of its OralDNA Labs salivary-diagnostics business to Access Genetics in Dec 2012, Quest Diagnostics came up with the plan to sell its HemoCue diagnostic products business. The company believes that these divestitures will allow it to refocus its resources toward core diagnostic information services, drive operational excellence and restore growth.

The company expects these divestments to reduce its 2012 revenues by $117 million, operating income by $11 million and net income from continuing operations by $15 million. Consequently, earnings per share (EPS) are expected to decrease by 9 cents in 2012. The company expects to incur an asset impairment charge of $89.5 million related to the divestment of HemoCue and OralDNA. Meanwhile, Quest Diagnostics disclosed the impact of Hurricane Sandy on its business. According to the company, this catastrophe was a big blow to its fourth-quarter 2012 performance, reducing revenues by an estimated $21 million, operating income by $16 million and EPS by 6 cents.

Earnings Whispers?

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

Negative Zacks ESP:  This is because the Most Accurate estimate stands at $1.03, while the Zacks Consensus Estimate is higher at $1.07. This comes to a difference of -3.74%.

Zacks #4 Rank (Sell). Quest Diagnostics’Zacks Rank #4 (Sell) lowers the predictive power of ESP because the Zacks Rank #4 together with a negative ESP makes surprise prediction difficult. Moreover, the stock has been witnessing a downward estimate revision over the past 30 and 60 days.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that they have the right ingredients to post an earnings beat this quarter:  

NuVasive, Inc. (NUVA), Earnings ESP of +72.73% and Zacks Rank #1 (Strong Buy)

Becton, Dickinson and Company (BDX), Earnings ESP of +3.25% and Zacks Rank #2 (Buy)

Hill-Rom Holdings Inc. (HRC), Earnings ESP of +2.27% and Zacks  Rank #2 (Buy)

About Earnings ESP

Would you like to own more stocks likely to beat their next earnings report? And avoid stocks likely to disappoint?

If yes, then it’s time you learn about the Earnings ESP score available on Zacks.com.


 
BECTON DICKINSO (BDX): Free Stock Analysis Report
 
QUEST DIAGNOSTC (DGX): Free Stock Analysis Report
 
HILL-ROM HLDGS (HRC): Free Stock Analysis Report
 
NUVASIVE INC (NUVA): Free Stock Analysis Report
 
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Zacks Investment Research

Zacks Investment Research

Zacks Investment Research Inc. is an equity research firm. It offers research through quantitative and qualitative analysis. The firm caters to individual and institutional clients. Zacks Investment Research Inc. was founded in 1978 and is based in Chicago, Illinois.