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Quest Diagnostics Q3 Revenues Grow 9 Percent as Firm Continues to Lean Into Acquisitions

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NEW YORK – Quest Diagnostics continues to lean into lab acquisitions as a growth driver with Jim Davis, the company's chairman, CEO, and president, noting during a conference call following release of the firm's Q3 2024 financial results that it is on track to close eight such deals this year.

Leading the way is Secaucus, New Jersey-based Quest's $985 million acquisition of Canadian laboratory firm LifeLabs, which the company announced in July.

The purchase of the company, one of Canada's largest lab outfits, "provides a strong foundation" for Quest to expand operations in that country, Davis said. He added that Quest sees Canada as having favorable demographics, noting that it has a higher population growth rate than the US. It also has a higher average age, which Davis said typically translates to higher levels of test usage.

Quest EVP and CFO Sam Samad said during the call that LifeLabs contributed roughly $70 million in revenue during the quarter.

Davis also highlighted Quest's recent acquisition of lab assets of Minneapolis-based Allina Health, its announced acquisition of lab assets from Cleveland-based University Hospitals and OhioHealth, as well as the acquisition at the end of the quarter of the laboratory business of an unnamed three physician groups in New York.

Davis said that the Allina, University Hospitals, and OhioHealth deals allowed Quest to penetrate several markets where it had strong payor access but a limited lab presence due to the fact that the ordering physician practices were largely owned by the area health systems.

"Those are the characteristics of the markets that we look for in terms of these outreach acquisitions," he said. "We look for markets where we have strong [payor] access… and we look for markets where health systems have dominated in that space and they may be willing to get out of that market."

Davis also highlighted a recent deal between Quest and Elevance Health under which, beginning Jan. 1, 2025, Quest will be in-network with Elevance affiliated health plans, including Anthem plans in Virginia, Nevada, Colorado, and Georgia.

He noted that while Quest was in-network with Elevance "broadly on a national basis," it had only limited in-network access in Georgia and Virginia and no in-network access in Colorado and Nevada.

Davis said the company's M&A pipeline "remain[s] strong," but added that Quest is now in a "phase of integration and digestion of the deals that we've just completed."

"We are hard at work on integrating these and getting the margin accretion that we've talked about," he said "Our appetite will continue for small outreach deals and we're always on the lookout for those."

Quest reported that its third quarter revenues grew 9 percent year over year.

For the three months ended Sept. 30, the company reported revenues of $2.49 billion, compared to $2.30 billion in the year-ago period and above the consensus Wall Street estimate of $2.42 billion.

Revenues from the company's testing business were $2.43 billion, up 9 percent from $2.23 billion in Q3 2023.

Requisition volumes were up 6 percent year over year in the quarter, with organic requisition volume up less than 1 percent and revenue per requisition up 3 percent.

For Q3, net income attributable to Quest was $226 million, or $1.99 per share, compared to $225 million, or $1.96 per share, for the same quarter in 2023.

Adjusted EPS was $2.30 per share for the quarter and beat the consensus analyst estimate of $2.26.

During the quarter, Quest spent $448 million on SG&A, up 18 percent from $380 million in the same quarter last year. The company ended Q3 2024 with $764 million in cash and cash equivalents.

For full-year 2024, Quest revised its revenue guidance to a new range of $9.80 billion to $9.85 billion from a previous range of $9.50 billion to $9.58 billion. It projected full-year 2024 adjusted EPS of $8.85 to $8.95 compared to a previous range of $8.80 to $9.00.

In Tuesday morning trading on the New York Stock Exchange, Quest shares were up 5 percent to $155.30.