Quest Diagnostics Inc. DGX is scheduled to report second-quarter 2017 earnings results before the opening bell on Jul 25.

Last quarter, the company beat the Zacks Consensus Estimate by 16 cents, delivering a positive earnings surprise of 13.68%. It is worth noting that Quest Diagnostics outperformed the Zacks Consensus Estimate in each of the preceding four quarters at an average of 5.15%. Let’s take a look at how things are shaping up prior to this announcement.

Factors at Play

Posing a threat to Quest Diagnostics’ revenue per requisition performance, the last reported first-quarter 2017 saw a 20-basis points (bps) decrease in the same. Moreover, we remain apprehensive, as the company’s two Professional Lab Services (PLS) engagement, WJ Barnabas Health and HealthONE System of HCA Holdings, Inc. (HCA) carry lower revenue per requisition due to the nature of work.

This apart, unit price headwinds had  less than 100 bps in the first quarter. While unit price headwinds stayed in moderate ranges (at approximately 1%) over the last few years, the company continues to expect the same for 2017 too.

Quest Diagnostics Incorporated Price and EPS Surprise

 

Quest Diagnostics Incorporated Price and EPS Surprise | Quest Diagnostics Incorporated Quote

Also, over the last two years, Quest Diagnostics faced several reimbursement issues that affected its revenues. The company is concerned about the CMS (Centers for Medicare & Medicaid Services) proposal related to Protecting Access to Medicare Act (PAMA). However, while reimbursement pressure has likely acted as an overhang on performance in the to-be-reported quarter, the company expects to beat the pressure through test and business mix.

On a positive note, as observed in the reported first quarter of fiscal 2017, Quest Diagnostics seems to be determined to stimulate performance by adhering to its two-point growth strategy – Accelerate growth and Drive operational Excellence.

We are also optimistic about the successful execution of the company’s strategy to grow its esoteric testing business and drive profitable growth.

Also, in the recent past, Quest Diagnostics witnessed significant growth through infectious disease testing, prescription drug monitoring and industry-leading wellness business. We expect these growth drivers to remain active through the second quarter as well, driving the same metrics as in the preceding quarter.

We believe all these recent developments will significantly contribute to the company’s top line in the second quarter.