10-QPeriod: Q3 FY2021

QUEST DIAGNOSTICS INC Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 22, 2021For Securities:DGX

Summary

Quest Diagnostics Inc. (DGX) reported its third-quarter 2021 financial results, indicating a slight decrease in total net revenues year-over-year, primarily driven by a decline in COVID-19 testing volumes, which offset growth in their core business. Despite the revenue dip, the company demonstrated strong operational performance, particularly in the nine-month period, with a significant increase in net income and diluted earnings per share compared to the prior year. This improvement was bolstered by the strategic divestiture of their stake in Q2 Solutions, resulting in a substantial gain, and continued cost management initiatives. The company also remains committed to shareholder returns through its active share repurchase program and dividend payouts. Looking ahead, Quest Diagnostics is navigating the evolving impact of the COVID-19 pandemic while focusing on its long-term growth strategies and cost optimization.

Financial Highlights

57 data points
Beta

Revenue

$2.77B

39.8% Gross Margin

Net Income

$505.00M

18.2% Net Margin

EPS (Diluted)

$4.02

Total Assets

$13.57B

Cash & Equivalents

$987.00M

Free Cash Flow

$472.00M

Financial Statements
Beta
Revenue$2.77B
Cost of Revenue$1.67B
Gross Profit$1.10B
SG&A Expenses$427.00M
Operating Expenses$2.12B
Operating Income$652.00M
Interest Expense$38.00M
Net Income$505.00M
EPS (Basic)$4.11
EPS (Diluted)$4.02
Shares Outstanding (Basic)123.00M
Shares Outstanding (Diluted)125.00M

Key Highlights

  • 1For the third quarter of 2021, net revenues were $2.77 billion, a slight decrease of 0.4% from $2.79 billion in the prior year period, largely due to a decrease in COVID-19 testing volumes.
  • 2Net income attributable to Quest Diagnostics for the third quarter of 2021 was $505 million, a decrease from $568 million in the same period last year, while diluted earnings per share were $4.02, down from $4.14.
  • 3For the nine months ended September 30, 2021, net revenues increased significantly by 25.0% to $8.04 billion from $6.44 billion in the prior year, driven by a robust recovery and growth in the base business, along with ongoing COVID-19 testing.
  • 4Net income attributable to Quest Diagnostics for the nine months ended September 30, 2021, saw a substantial increase of 88.4% to $1.61 billion, with diluted earnings per share rising to $12.41 from $6.25.
  • 5The company recorded a significant pre-tax gain of $314 million from the sale of its 40% ownership interest in Q2 Solutions during the nine months ended September 30, 2021.
  • 6Quest Diagnostics repurchased $1.6 billion of its common stock during the nine months ended September 30, 2021, including $1.2 billion under Accelerated Share Repurchase (ASR) agreements, demonstrating a commitment to shareholder returns.
  • 7Cash provided by operating activities for the nine months ended September 30, 2021, increased by $288 million to $1.75 billion compared to the prior year period, reflecting improved operating income.

Frequently Asked Questions

Quest Diagnostics reported net revenues of $2.77 billion for the third quarter of 2021, a slight decrease of 0.4% compared to $2.79 billion in the same period of 2020. This was primarily due to a decrease in COVID-19 testing volumes, which was partially offset by growth in the company's base business.

During the nine months ended September 30, 2021, Quest Diagnostics recorded a significant pre-tax gain of $314 million from the sale of its 40% ownership interest in Q2 Solutions. This transaction contributed positively to the company's overall financial performance for the period.

Quest Diagnostics generated strong operating cash flow, with $1.75 billion in net cash provided by operating activities for the first nine months of 2021, an increase of $288 million year-over-year. The company also actively engaged in its share repurchase program, buying back $1.6 billion of its stock during the same period, including significant ASR agreements, indicating a focus on returning capital to shareholders.

The company expects the demand for COVID-19 testing to trend downward through the remainder of 2021. While this will impact revenue from COVID-19 specific tests, Quest Diagnostics is seeing a recovery and growth in its base business, which is expected to continue as healthcare systems normalize post-pandemic. The company is focusing on its core diagnostic information services and other strategic initiatives to drive future growth.