Should You Continue to Retain DGX Stock in Your Portfolio?

Quest Diagnostics Inc. DGX is investing in advanced diagnostics to deliver and scale innovative services that improve patient care and drive growth. The company also strategizes to generate growth through value-creating, strategically aligned acquisitions using disciplined investment criteria. Efforts to drive operational excellence are also encouraging. Meanwhile, escalating debt levels and intense competitive space raise concerns for Quest Diagnostics’ operations.

In the past year, this Zacks Rank #3 (Hold) stock has rallied 26.4% compared with the industry’s 2.9% growth and the S&P 500 composite’s 7.7% rise.

The renowned provider of diagnostic information services has a market capitalization of $19.76 billion. Quest Diagnostics has an earnings yield of 5.48% compared with the industry’s yield of 4.41%. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 2.03%.

Tailwinds for DGX

Strong Potential of Advanced Diagnostics: In the first quarter of 2025, each of the five areas — advanced cardiometabolic, autoimmune, brain health, oncology, and women's and reproductive health —  delivered solid double-digit growth, significantly contributing to the total revenues. Brain Health gained from robust demand for AD-detect blood tests for assessing Alzheimer's disease risk, with the company planning to expand the portfolio with new biomarkers to help providers better assess Alzheimer's and other forms of dementia.

In women's and reproductive health, Quest Diagnostics introduced a new self-collection option for a specimen for HPV cervical cancer screening at a doctor's office. Also, during the first quarter, Quest Diagnostics began receiving commercial orders for the Haystack MRD test for assessing the early risk of cancer recurrence. The company anticipates generating revenues from the test this year.

Progress With Acquisition Strategy: In 2024, Quest Diagnostics completed eight acquisitions, all of which align with its criteria for growth, profitability and returns. The addition of LifeLabs strengthened its foothold in the Canadian market and created new growth opportunities. The company acquired Allina Health, a leading non-profit health system serving Minnesota and western Wisconsin, and the laboratory business of three physician groups in New York. Additionally, Quest Diagnostics acquired PathAI Diagnostics to increase the adoption of AI and digital pathology for better diagnosis of cancer and other diseases.

During the fourth quarter, the company completed the acquisition of outreach lab assets from Ohio Health and University Hospitals, two leading non-profit health systems in Ohio. This year, DGX plans to moderate its acquisition pace and focus on driving growth from these completed transactions. For 2025, Quest Diagnostics plans to slow its acquisition pace and prioritize maximizing productivity from last year’s completed deals.

Strategic Imperative to Drive Operational Excellence: As part of its broader strategy to drive operational improvements across the business, Quest Diagnostics deploys automation and AI to improve quality, service, efficiency and the workforce experience. The company continues to target 3% annual cost savings and productivity improvements through its Invigorate cost-savings program, which includes structured plans to drive savings and improve productivity across the value chain.

Quest Diagnostics is also automating several areas of its laboratories, from tuberculosis testing to cervical cancer screening. It also recently announced Project Nova, a new IT initiative to modernize its system architecture, reduce IT costs over the long term and support the company’s ability to optimize data insights and GenAI. In March 2025, Quest Diagnostics announced a collaboration with Google Cloud to streamline data management and employ GenAI to personalize customer and employee experiences.

Concerns for DGX

Escalating Debt Level: At the end of the first quarter of 2025, long-term debt totaled $5.86 billion, while the cash and cash equivalent balance was only $188 million. The current portion of the debt was $1 million. The times interest ratio, which indicates the company’s capacity to pay interest, declined 0.6% sequentially to 6.3%.

Competitive Landscape: Quest Diagnostics faces intense competition primarily from Labcorp, other commercial laboratories and hospitals. While pricing is an important factor in choosing a testing lab, hospital-affiliated physicians expect a high level of service, including an accurate and rapid turnaround of testing results. As a result, Quest Diagnostics and other commercial labs compete with hospital-affiliated labs primarily based on the quality of service.     

DGX Stock Estimate Trend

The Zacks Consensus Estimate for Quest Diagnostics’ 2025 earnings per share (EPS) has dropped by 1 cent to $9.69 in the past 30 days.

The consensus estimate for the company’s 2025 revenues is pegged at $10.77 billion. This suggests 9.1% growth from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Boston Scientific BSX and Cardinal Health CAH.

Phibro Animal Health has an estimated long-term earnings growth rate of 26.2% compared with the industry’s 15.9%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 30.6%. Its shares have surged 34.5% compared with the industry’s 8.9% growth in the past year.

PAHC carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Boston Scientific, carrying a Zacks Rank #2, has an earnings yield of 2.8% compared with the industry’s -0.4%. Shares of the company have rallied 40% compared with the industry’s 8.9% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 8.8%.

Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated earnings growth rate of 11.8% for fiscal 2026 compared with the industry’s 9.8%. Shares of the company have rallied 52.6% against the industry’s 4.1% fall. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 10.3%.

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

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