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Quest Diagnostics Slowing Pace of Acquisitions as Q4 2024 Revenues Rise 15 Percent

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Quest

NEW YORK – Following a year of significant hospital and healthcare system deals, Quest Diagnostics expects to "moderate [its] pace of acquisitions in 2025," President and CEO Jim Davis said Thursday during a conference call following the release of the company's Q4 2024 financial results.

While Quest will continue to look at acquisition opportunities, it plans to focus on integrating and driving productivity of recently acquired assets including Canadian firm LifeLabs, which it purchased in July for $985 million.

In total, the company completed eight acquisitions in 2024, including the purchase of four hospital outreach labs in the US, Davis said.

He noted that these acquisitions will contribute around 6 percentage points of revenue growth in 2025, with LifeLabs accounting for more than two-thirds of that.

Quest Executive VP and CFO Sam Samad said that the LifeLabs integration is a relatively "lighter" process, "because they are already operating and we are not looking to close labs or move them to our systems at this point."

Samad added that while the company expects to slow its pace of M&A, it has allocated capital for potential deals "mostly focused on hospital outreach lab acquisitions," which he said "are very attractive opportunities that scale very quickly and get to a healthy contribution margin."

Samad said that Quest typically pays around 3.5X revenues for its outreach purchases.

Davis highlighted Quest's plans for a broad rollout of new automation and artificial intelligence technologies in 2025, noting that in Q4 2024 the company began piloting at its Clifton, New Jersey, lab several tools, including an automated tuberculosis test labeling and prep system, an automated test accessioning system, and a third-party AI-based parasitology screening system. He said the company plans to begin deploying these tools in its other labs in 2025.

He also touched on the company's preparations for compliance with the first stage of regulations under the US Food and Drug Administration's rule on laboratory-developed tests (LDTs), which will go into effect in May.

"We have to stand up a complaint handling unit and enable … medical device reporting to the FDA," Davis said. "That does require some investment."

He noted that Quest's trade association, the American Clinical Laboratory Association (ACLA), is currently involved in a lawsuit that seeks to stop implementation of the rule and that the company expects the suit to be settled sometime in the first or early second quarter of the year.

For the fourth quarter, Quest reported a 15 percent year-over-year rise in revenues.

Revenues for the three months ended Dec. 31, 2024, were $2.62 billion, up from $2.29 billion in the same quarter last year and above the consensus Wall Street estimate of $2.58 billion.

Requisition volumes rose 14 percent during the quarter while revenue per requisition was up less than 1 percent. Organic requisition volume rose less than 1 percent year over year, the Secaucus, New Jersey-based company said.

Net income for the quarter attributable to Quest was $222 million, or $1.95 per share, versus $192 million, or $1.70 per share, in the fourth quarter of last year. Adjusted EPS was $2.23 and beat the analyst average estimate of $2.19 per share.

In the fourth quarter, Quest spent $466 million on SG&A, up 14 percent from $407 million in the same quarter last year.

For full-year 2024, revenues were $9.87 billion, up 7 percent from $9.25 billion in 2023 and above the consensus Wall Street estimate of $9.83 billion.

Requisition volumes rose 6 percent year over year while revenue per requisition rose 1 percent.

Net income attributable to Quest for 2024 was $871 million, or $7.69 per share, compared to $854 million, or $7.49 per share, in 2023. Adjusted EPS for the year was $8.93, above the consensus analyst estimate of $8.85.

In 2024, Quest spent $1.77 billion on SG&A, up 8 percent from $1.64 billion in 2023.

The company ended 2024 with $549 million in cash and cash equivalents.

Quest said it expects full-year 2025 revenues of between $10.70 billion and $10.85 billion, which implies a year-over-year increase of between 8.4 percent and 9.9 percent. It expects adjusted diluted EPS of between $9.55 and $9.80.

Quest said that its board has authorized an increase to its quarterly dividend to $.80 per share from $.75 per share, payable on April 21 to shareholders of record on April 7. The annual dividend will now be $3.20 per share.

In morning trading on the New York Stock Exchange, Quest's shares were up 6 percent to $165.12.