Reasons to Retain QuidelOrtho Stock in Your Portfolio for Now

QuidelOrtho Corporation QDEL is well-poised for growth in the coming quarters, courtesy of its strong product portfolio. The optimism, led by a solid fourth-quarter 2024 results, is expected to contribute further. However, risks due to overdependence on diagnostic tests and reimbursement policies persist.

This Zacks Rank #3 (Hold) company has lost 43.1% in the year to date period compared with 3.6% decline of the industry. The S&P 500 has witnessed 15.6% decline in the said time frame.

The renowned rapid diagnostic testing solutions provider has a market capitalization of $1.91 billion. QuidelOrtho’s earnings yield of 8.6% compares favorably with the industry’s 0.4%. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 64.44%.

Factors Favoring QDEL’s Growth

Potential in Diagnostic Business: QuidelOrtho’s focus on advancing its diagnostics business to improve human health has enabled the company to target market segments that represent significant total market opportunities. The company believes it can be successful in doing so by applying its expertise and know-how to develop differentiated technologies and products.

The company’s diagnostic testing solutions are designed to provide specialized results that serve a broad range of customers by addressing the market requirements of ease of use, reduced cost, increased test accuracy and reduced time to result. The clinical diagnostics market was valued at approximately $84.2 billion in 2024 and is anticipated to reach $109.2 billion by 2029 at a CAGR of 5.5%, per a report by Mordor Intelligence.

Robust Product Portfolio: QuidelOrtho offers diagnostic testing products to both healthcare professionals and individual consumers, with a portfolio that includes the Sofia and Sofia 2 analyzers, QuickVue, InflammaDry, and AdenoPlus. Its Savanna instrument stands out in the Molecular Point-of-Care space and is expected to fuel revenue and margin growth following a strong U.S. launch. With FDA approvals already secured for the Savanna system and HSV panel, the company aims to initiate clinical trials for its respiratory panel in 2025, targeting the launch of both respiratory and STI panels within the same year.

In April 2024, QuidelOrtho enhanced its Labs segment by adding the ARK Fentanyl II Assay to its U.S. Vitros XT, 5600 Integrated Systems, and Vitros 4600 Chemistry System. This move addresses the growing need for opioid testing, particularly in hospital and emergency care settings. The new assay aligns with the company’s broader mission to deliver advanced diagnostics that respond to evolving public health challenges.

Solid Q4 Results: QuidelOrtho ended the fourth quarter of 2024 with better-than-expected results. The company registered robust revenues from its Labs and Immunohematology business units in China and Other regions, which were encouraging. 

Per management, growth of QDEL’s underlying business with its recurring revenue business model continued to perform well during the quarter. The company has also made progress in implementing its cost-saving initiatives and is targeting additional cost savings across the business. Management expects that these initiatives will enable QuidelOrtho to operate more effectively and deliver incremental margin improvement in 2025 and beyond. This looks promising for the stock.

Factors That May Offset the Gains for QDEL

Third-Party Reimbursement Policies: QuidelOrtho's Point-of-Care products are primarily used by physicians and other healthcare providers. In the United States, these providers, including hospitals and physicians, typically depend on third-party payers, such as private health insurance, Medicare, and Medicaid, to reimburse all or part of the cost of diagnostic procedures. The success of QuidelOrtho's products could be impacted if healthcare providers do not receive sufficient reimbursement from third-party payers for the costs associated with the company's products.

Overdependence on Diagnostic Tests:  A substantial portion of QuidelOrtho's total revenues is derived from a limited number of product families, with respiratory products being a key contributor. In September 2024 and September 2023, respiratory products accounted for approximately 23% and 25% of total revenues, respectively, driven largely by COVID-19 product sales. The year-over-year decline was attributed to a milder respiratory season in 2023, resulting in a roughly $1 billion decrease in COVID-19-related testing revenues.

Estimate Trend

QuidelOrtho is witnessing a stable estimate revision trend for 2025. In the past 30 days, the Zacks Consensus Estimate for its earnings has remained stable at $2.34 per share.

The Zacks Consensus Estimate for the company’s first-quarter 2025 revenues is pegged at $696.9 million, indicating a 1.2% decline from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space include Masimo MASI, Boston Scientific BSX and AngioDynamics ANGO. At present, Masimo and AngioDynamics sport a Zacks Rank #1 (Strong Buy), whereas Boston Scientific carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo’s shares have rallied 30.1% in the past year. Estimates for MASI’s 2024 earnings per share (EPS) have increased 1.2% to $4.10 in the past 30 days. MASI’s earnings beat estimates in each of the trailing four quarters, the average surprise being 17.1%. In the last reported quarter, it posted an earnings surprise of 16.6%.

Estimates for AngioDynamics’ fiscal 2025 EPS have increased 1.5% to $7.94 in the past 30 days. Shares of the company have gained 15.2% in the past year against the industry’s 4.1% decline. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%. In the last reported quarter, it delivered an earnings surprise of 10.3%.

Estimates for Boston Scientific’s 2025 EPS have jumped 2.9% to $2.85 in the past 30 days. Shares of the company have surged 56.7% in the past year compared with the industry’s growth of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.25%. In the last reported quarter, it delivered an earnings surprise of 7.69%.

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This article originally published on Zacks Investment Research (zacks.com).

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