Quest Diagnostics Inc. (DGX) is scheduled to report its third-quarter 2014 results before the opening bell on Oct 23. Last quarter, Quest Diagnostics had posted a positive earnings surprise of 1.89%. Let’s see how things are shaping up for this announcement.

Factors at Play

Quest Diagnostics has delivered positive earnings surprises in two of the trailing four quarters with an average beat of 0.98%.

Pressure on volume owing to a difficult macro-economic situation and pricing constitute the primary risk for Quest Diagnostics. In the second quarter, volume increased 7.7% year over year, entirely because of a recent acquisition which added 8.5% to it. Excluding acquisitions, underlying volume declined 0.8% year over year.

The poor volume was approximately owing to the combination of Medicare cuts and commercial pricing. We are concerned with the weak volume growth over the last few quarters. We expect the low level of employment and slow growth of commercially-insured lives to continuously impact the company’s overall improvement, until the economy rebounds.

Moreover, lower healthcare utilization and reimbursement pressure from the government and other payers continue to pose threats. Although, the company claims it is witnessing some signs of improving healthcare utilization, near-term outlook appears bleak.

However, Quest Diagnostics has been focusing on areas with high potential such as gene-based esoteric testing for cancer, cardiovascular disease, infectious disease and neurological disorders. As part of this strategy, the company acquired Summit Health and Solstas Lab Partners Group in 2014 and formed two significant associations with Memorial Sloan-Kettering and Sequenom. These deals are consistent with Quest Diagnostic’s aim of becoming a global leader in diagnostic and healthcare services. We are also upbeat about the long-term growth drivers which are expected to deliver positive outcomes in the coming period.

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 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 0.00%, since both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.08.

Zacks Rank: Quest Diagnostics’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.

Other Stocks to Consider

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

Pacific Biosciences of California, Inc. (PACB) has an earnings ESP of +36.84% and a Zacks Rank #1 (Strong Buy). Pacific Biosciences will report third-quarter earnings on Oct 23.

Medivation, Inc. (MDVN) has an earnings ESP of +13.46% and a Zacks Rank #1. Medivation, Inc. is expected to report its third-quarter earnings on Nov 11.

bluebird bio, Inc. (BLUE) has an earnings ESP of +5.77% and a Zacks Rank #2 (Buy). bluebird bio is scheduled to report its third-quarter earnings on Nov 13.

Read the Full Research Report on DGX
Read the Full Research Report on MDVN
Read the Full Research Report on PACB
Read the Full Research Report on BLUE


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