What's Driving Quest Diagnostics Stock's 25.6% Rally in a Year?

Quest Diagnostics’ DGX shares have rallied 25.6% in the past year, reflecting sustained momentum. It has outperformed the industry’s 5.5% rise and the S&P 500 composite’s 12% gain.

Carrying a Zacks Rank #3 (Hold) at present, the renowned clinical laboratory benefits from the increasing utilization of the Advanced Diagnostics portfolio. Acquisitions also remain a key growth driver, while efficiency gains from AI and automation further bode well for the stock.

Secaucus, NJ-based Quest Diagnostics provides a broad range of diagnostic information services to patients, clinicians and healthcare organizations. The company is a key provider of reference testing for approximately half of the hospitals in the United States. It also offers physician services that are reimbursed by Medicare under a physician fee schedule, subject to adjustment on an annual basis. Strategic acquisitions and continuous quality improvement are also part of its growth strategy.

Factors Favoring DGX’s Growth

The rally in the share price can be linked to the company’s ongoing momentum in advanced diagnostics, mainly in advanced cardiometabolic, autoimmune, brain health, oncology, and women's and reproductive health areas. These offerings continue to drive growth across Quest Diagnostics’ core customer channels — physicians, hospitals and consumers. In the first quarter of 2025, each of the five areas delivered solid double-digit growth, significantly contributing to the total revenues. Brain Health continues to see impressive demand for AD-detect blood tests for assessing Alzheimer's disease risk. Meanwhile, advanced cardiometabolic and autoimmune testing areas are poised to continue strong growth throughout the year.

Quest Diagnostics puts a high emphasis on accretive outreach purchases and other independent labs. In 2024, the company completed eight acquisitions, including LifeLabs, which strengthened its foothold in the Canadian market and opened new growth opportunities. It also acquired PathAI Diagnostics to increase the adoption of AI and digital pathology for better diagnosis of cancer and other diseases. The recent acquisitions were a key contributor to the company’s first-quarter performance, helping deliver strong DIS revenues and other performance metrics.

Meanwhile, Quest Diagnostics’ Hospital channel capitalizes on the growing market challenges faced by hospitals, such as high wages and supply inflation, constrained access to capital and keeping pace with laboratory innovation. It also enhanced its QuestHealth.com platform, streamlining the order process, which helped drive a sharp increase in first-time orders and also introduced 10 new tests.

Additionally, investors are upbeatabout the company’s use of automation and AI as part of its broader strategy to drive operational improvements. Quest Diagnostics 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. In March 2025, the company announced a collaboration with Google Cloud to streamline data management and employ GenAI to personalize customer and employee experiences.

Concerns for DGX

The company’s solvency level remains a concern, with long-term debt totaling $5.68 billion at the end of the first quarter of 2025 compared to only $188 million in cash and cash equivalents. Healthcare regulatory shifts under the new U.S. administration could negatively impact its business.

A Glance at DGX’s Estimates

The Zacks Consensus Estimate for Quest Diagnostics’ 2025 and 2026 earnings per share (EPS) is expected to increase 8.6% and 8.2%, respectively, to $9.70 and $10.50. In the past 30 days, the Zacks Consensus Estimate for the company's 2025 EPS has increased by 1 cent.

Revenues for 2025 are projected to grow 9.2% to $10.78 billion, followed by a 3.7% increase to $11.19 billion in 2026.

Key Picks

Some better-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Prestige Consumer Healthcare PBH and Inspira Medical Health INSP.

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 rallied 30.8% compared with the industry’s 10.5% 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.

Prestige Consumer Healthcare, currently carrying a Zacks Rank #2, has an earnings yield of 5.4% compared with the industry’s flat yield. Shares of the company have rallied 35.2% compared with the industry’s 10.5% growth. PBH’s earnings surpassed estimates in three of the trailing four quarters and matched on one occasion, the average surprise being 2.8%.

Inspira Medical Health, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 28.9% compared with the industry’s 25.2%. Shares of the company have fallen 7.1% against the industry’s 21.9% growth. INSP’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 356.9%.

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

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