Is Quest Diagnostics Stock a Right Pick for Your Portfolio Now?

Quest Diagnostics’ DGX solutions are focused on meeting the evolving needs of its core customers — physicians, hospitals and consumers. The company aims to generate growth through value-creating, strategically aligned acquisitions using disciplined investment criteria. Additionally, it invests in advanced diagnostics to deliver and scale innovative services that improve patient care and drive growth. Meanwhile, unfavorable solvency and adverse impacts from macroeconomic challenges raise concerns for Quest Diagnostics’ operations.In the past year, this Zacks Rank #3 (Hold) stock has rallied 18.8% against the industry’s 1.7% fall and the S&P 500 composite’s 18.7% rise.The renowned provider of diagnostic information services has a market capitalization of $20.53 billion. Quest Diagnostics has an earnings yield of 5.3% compared with the industry’s yield of 4.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 2.1%.Tailwinds for DGXGrowth Momentum in the Base Business: In the second quarter of 2025, the company’s physician channel grew 20%, mostly from acquisitions and supported by high-single-digit organic gains. The increase reflected higher test per requisition, strong commercial execution and ongoing momentum in large enterprise accounts, particularly in functional medicine. Meanwhile, its hospital channel capitalizes on the growing market challenges, such as high wages and supply inflation, constrained access to capital and keeping pace with laboratory innovation. Through reference testing, Collaborative Lab Solutions (formerly Professional Lab Services) and outreach lab acquisitions, it provides hospitals with strategic options for accessing top diagnostic innovations without the burden of running a lab.Additionally, the company’s consumer-testing channel, QuestHealth.com, continues to benefit from a growing array of offerings, including a new women's hormone panel. Quest Diagnostics is also expanding partnerships with top consumer and wellness brands that value its high-quality lab testing, broad access and flexible technology integrations to power their offerings.Image Source: Zacks Investment ResearchProgress With Acquisition Strategy: Quest Diagnostics puts a high emphasis on accretive outreach purchases, as well as other independent labs. In 2024, Quest Diagnostics completed eight acquisitions, including LifeLabs, which expanded its foothold in Canada, and Allina Health’s select lab assets.  The company also acquired the laboratory business of three physician groups in New York. Additionally, the acquisition of PathAI Diagnostics supports DGX’s plan to increase the adoption of AI and digital pathology for better diagnosis of cancer and other diseases.The company also completed the acquisition of outreach lab assets from Ohio Health and University Hospitals — two leading non-profit health systems in Ohio. This year, Quest Diagnostics is prioritizing optimizing productivity from these deals. Revenue contributions from M&A were 10% in the second quarter, with LifeLabs accounting for approximately 8%.Strong Potential of Advanced Diagnostics: Quest Diagnostics focuses on five major clinical areas — advanced cardiometabolic, autoimmune, brain health, oncology, and women's and reproductive health — to enable growth across its customer channels. In the second quarter of 2025, DGX posted double-digit revenue growth in several areas, including advanced cardiometabolic, especially testing for metabolic and endocrine disorders and chronic kidney disease, as well as for the analyzer autoimmune solution. In brain health, demand for the AD-Detect blood test for Alzheimer's disease remained strong.Quest Diagnostics also launched a new AB 42/40 and p-tau-217 panel to aid in identifying amyloid brain pathology in symptomatic patients. In oncology, the company is ramping up commercial outreach to drive Haystack MRD market adoption. In the long term, Quest Diagnostics plans to sustain the growth momentum in each of the five areas.What Ails DGX?Rising Debt Levels: At the end of the second quarter of 2025, the long-term debt totaled $5.17 billion, while the cash and cash equivalent balance was only $319 million. The current portion of the debt was $504 million. Moreover, a higher debt level induces higher interest payments, which come along with the risk of failure to pay the same. The times interest ratio, which indicates the company’s capacity to pay interest, declined 0.2% sequentially to 6.1%.Macroeconomic Woes: As the U.S. healthcare system continues to evolve, Quest Diagnostics faces several inherent risks. Government payers, such as Medicare and Medicaid, have taken steps to reduce the utilization and reimbursement of healthcare services, including clinical testing services. Meanwhile, the industry-wide trend of consolidation has resulted in larger insurance plans with significant bargaining power, making it difficult for Quest Diagnostics to negotiate fee arrangements and possibly limiting access to its newer innovative solutions. Also, any changes in U.S. healthcare regulation by the new U.S. administration could have a material adverse effect on the company’s business.DGX Stock Estimate TrendThe Zacks Consensus Estimate for Quest Diagnostics’ 2025 earnings per share (EPS) has increased 0.4% to $9.74 in the past 60 days.The consensus estimate for the company’s 2025 revenues is pegged at $10.85 billion. This suggests 9.9% growth from the year-ago reported number.Key PicksSome better-ranked stocks in the broader medical space are Masimo MASI, Phibro Animal Health PAHC and Cardinal Health CAH.Masimo has an earnings yield of 3.77% against the industry’s 4.4% fall. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 13.8%. MASI shares have rallied 18% against the industry’s 17.7% fall in the past year.MASI carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Phibro Animal Health, carrying a Zacks Rank #2, has an earnings yield of 6.5% compared with the industry’s 0.5% growth. Shares of the company have surged 80.2% compared with the industry’s flat growth. PAHC’s earnings outpaced estimates in each of the trailing four quarters, with the average surprise being 27.9%.Cardinal Health, carrying a Zacks Rank #2, has an estimated long-term earnings growth rate of 12.5% compared with the industry’s 9.7% growth. Shares of the company have rallied 36.1% against the industry’s 2.9% fall. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 9.2%.Free Report: 3 Software Stocks Poised to SkyrocketSoftware stocks are poised to catapult higher in the coming months (and years) thanks to several factors, especially the explosive growth of AI. Zacks' urgent report reveals 3 top software stocks to own right now.Access the report free today >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report Cardinal Health, Inc. (CAH): Free Stock Analysis Report Masimo Corporation (MASI): Free Stock Analysis Report Phibro Animal Health Corporation (PAHC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks