Skip to main content
Premium Trial:

Request an Annual Quote

Quest Projects 10 Percent Drop in 2023 Revenue But Expects Rise in Base Testing Business


NEW YORK – While Quest Diagnostics expects a decline in its COVID-19 testing business to drive a roughly 10 percent drop in 2023 revenue, President and CEO Jim Davis projected that reimbursement changes, consumer-initiated testing, and acquisitions, among other things, would yield improvement in the company's base business.

During a conference call Thursday following release of Quest's Q4 results, Davis highlighted several factors the firm is counting on to boost base testing revenues, which it anticipates will rise by 3 percent to 4 percent in 2023.

Perhaps most straightforwardly, the company will enjoy certain favorable changes to Medicare reimbursement rates in 2023. Congress's decision at the end of 2022 to delay the implementation of cuts under the Protecting Access to Medicare Act removed what Davis said would have been an $80 million to $85 million tailwind. Meanwhile, the Centers for Medicare and Medicaid Services this year raised specimen collection fees, which Davis estimated would boost Quest's revenues by $35 million to $40 million in 2023.

On the private payor side, Davis said that in contract renegotiations Quest was seeing either reimbursement hold steady or increase in the "preponderance" of its contracts. He added that the company aims to use the hike in Medicare specimen collection rates to negotiate better collection rates with its private payor customers.

Davis also highlighted consumer-initiated testing as a growth area for the company, noting that it launched a new consumer site and ramped up marketing for the service in Q4 2022. Quest's consumer-initiated business did $96 million in revenues in 2022, though Davis said that the majority of this came from COVID-19 testing. He added, though, that the business saw more than 50 percent year-over-year growth in December following the marketing ramp-up, with much of this growth concentrated in the company's base testing business.

"Obviously, [consumer-initiated] COVID will significantly ramp down [in 2023], but we expect our base to significantly ramp up," Davis said.

On the acquisition front, Davis said Quest expects to close several deals in the first half of the year. He said the company's acquisition "funnel is as big as it has ever been," though he also noted that there were no longer many regional labs of significant size left for acquisition.

Despite the potential for growth in its base testing business, Quest's full-year 2023 revenue guidance came in below the consensus Wall Street estimate. The company projected 2023 revenues of between $8.83 billion and $9.03 billion, which would be a decline of between 11 and 9 percent compared to 2022. Wall Street had projected revenues of $9.13 billion.

EPS is expected to be in the range of $7.61 to $8.21. Adjusted EPS is expected to be between $8.40 and $9.00. The company projected COVID-19 testing revenues of between $175 million and $275 million, a decline of between 88 percent and 81 percent compared to 2022. Davis said that when the COVID-19 public health emergency (PHE) expires in May, CMS will reimburse COVID-19 molecular tests at $51. He said Quest is negotiating with private payors regarding coverage policies and reimbursement for COVID-19 testing after the end of the PHE.

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

Revenues for the three months ended Dec. 31 were $2.33 billion, down from $2.74 billion in the same quarter last year but above the consensus Wall Street estimate of $2.26 billion.

Base revenues grew 6 percent year over year to $2.15 billion from $2.02 billion, while COVID-19 testing revenues were down 75 percent to $184 million from $722 million.

Test volumes fell 11 percent during the quarter and revenue per test fell by 5 percent.

Net income for the quarter attributable to Quest was $101 million, or $.87 per share, down from $390 million, or $3.12 per share, in the fourth quarter of last year. Adjusted EPS was $1.98 and beat the analyst average estimate of $1.91.

In the fourth quarter, Quest spent $563 million on SG&A, up 21 percent from $464 million in the same quarter last year.

Davis said the company had taken steps to reduce SG&A spending by $100 million in 2023, including laying off roughly 1.5 percent of its workforce, mainly, he said, employees in corporate support functions. As of Dec. 31, the most recent date for which figures are available, Quest had approximately 49,000 employees.

For full-year 2022, revenues were $9.88 billion, down 8 percent from $10.79 billion in 2021, and above the consensus Wall Street estimate of $9.83 billion. Test volumes decreased 5 percent year over year while revenue per test also fell 5 percent.

Net income attributable to Quest for 2022 was $946 million, or $7.97 per share, compared to $2.00 billion, or $15.55 per share, in 2021. Adjusted EPS for the year was $9.95, beating the consensus analyst estimate of $9.85.

In 2022, Quest spent $1.87 billion on SG&A, up 9 percent from $1.73 billion in 2021.

The company ended 2022 with $315 million in cash and cash equivalents.

Separately, Quest said that its board has authorized an increase to its quarterly dividend to $.71 per share from $.66 per share, payable on April 24 to shareholders of record on April 10. The annual dividend will now be $2.84 per share.

The company's board has also increased its share repurchase authorization by $1 billion, adding to the $311 million that was available as of Dec. 31.

In morning trading on the New York Stock Exchange, Quest's shares were down less than 1 percent to $148.25.