As the Q1 earnings season wraps, let’s dig into this quarter’s best and worst performers in the testing & diagnostics services industry, including Quest (NYSE:DGX) and its peers.
The testing and diagnostics services industry plays a crucial role in disease detection, monitoring, and prevention, serving hospitals, clinics, and individual consumers. This sector benefits from stable demand, driven by an aging population, increased prevalence of chronic diseases, and growing awareness of preventive healthcare. Recurring revenue streams come from routine screenings, lab tests, and diagnostic imaging, with reimbursement from Medicare, Medicaid, private insurance, and out-of-pocket payments. However, the industry faces challenges such as pricing pressures, regulatory compliance, and the need for continuous investment in new testing technologies. Looking ahead, industry tailwinds include the expansion of personalized medicine, increased adoption of at-home and rapid diagnostic tests, and advancements in AI-driven diagnostics that enhance accuracy and efficiency. However, headwinds such as reimbursement uncertainties, competition from decentralized testing solutions, and regulatory scrutiny over test validity and cost-effectiveness may impact profitability. Adapting to evolving healthcare models and integrating automation will be key for sustaining growth and maintaining operational efficiency.
The 5 testing & diagnostics services stocks we track reported a strong Q1. As a group, revenues beat analysts’ consensus estimates by 2.2%.
While some testing & diagnostics services stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 4.5% since the latest earnings results.
Quest (NYSE:DGX)
Processing approximately one-third of the adult U.S. population's lab tests annually, Quest Diagnostics (NYSE:DGX) provides laboratory testing and diagnostic information services to patients, physicians, hospitals, and other healthcare providers across the United States.
Quest reported revenues of $2.65 billion, up 12.1% year on year. This print exceeded analysts’ expectations by 1.3%. Overall, it was a satisfactory quarter for the company with a solid beat of analysts’ sales volume estimates but full-year EPS guidance in line with analysts’ estimates.
"In the first quarter, we delivered strong revenue growth of approximately 12%, including nearly 2.5% in organic growth, as demand rebounded in March following weather impacts early in the quarter. Our growth was due to contributions from acquisitions and large enterprise accounts, demand for our advanced diagnostics portfolio, and expanded health plan access," said Jim Davis, Chairman, CEO and President.
Quest delivered the weakest full-year guidance update of the whole group. Interestingly, the stock is up 6% since reporting and currently trades at $171.63.
Is now the time to buy Quest? Access our full analysis of the earnings results here, it’s free.
Best Q1: Guardant Health (NASDAQ:GH)
Pioneering the field of "liquid biopsy" with technology that can identify cancer-specific genetic mutations from a simple blood draw, Guardant Health (NASDAQ:GH) develops blood tests that detect and monitor cancer by analyzing tumor DNA in the bloodstream, helping doctors make treatment decisions without invasive biopsies.
Guardant Health reported revenues of $203.5 million, up 20.8% year on year, outperforming analysts’ expectations by 6.9%. The business had a stunning quarter with an impressive beat of analysts’ sales volume estimates and full-year revenue guidance exceeding analysts’ expectations.
Guardant Health pulled off the biggest analyst estimates beat, fastest revenue growth, and highest full-year guidance raise among its peers. The market seems unhappy with the results as the stock is down 13.1% since reporting. It currently trades at $41.
Is now the time to buy Guardant Health? Access our full analysis of the earnings results here, it’s free.
Slowest Q1: Labcorp (NYSE:LH)
With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE:LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.
Labcorp reported revenues of $3.35 billion, up 5.3% year on year, falling short of analysts’ expectations by 1.9%. It was a softer quarter as it posted a miss of analysts’ organic revenue estimates and full-year EPS guidance in line with analysts’ estimates.
Labcorp delivered the weakest performance against analyst estimates and slowest revenue growth in the group. Interestingly, the stock is up 8.2% since the results and currently trades at $248.97.
Read our full analysis of Labcorp’s results here.
RadNet (NASDAQ:RDNT)
With over 350 imaging facilities across seven states and a growing artificial intelligence division, RadNet (NASDAQ:RDNT) operates a network of outpatient diagnostic imaging centers across the United States, offering services like MRI, CT scans, PET scans, mammography, and X-rays.
RadNet reported revenues of $471.4 million, up 9.2% year on year. This number beat analysts’ expectations by 6.4%. It was a strong quarter as it also logged a solid beat of analysts’ same-store sales estimates.
The stock is up 3.3% since reporting and currently trades at $57.65.
Read our full, actionable report on RadNet here, it’s free.
NeoGenomics (NASDAQ:NEO)
Operating a network of CAP-accredited and CLIA-certified laboratories across the United States and United Kingdom, NeoGenomics (NASDAQ:NEO) provides specialized cancer diagnostic testing services, including genetic analysis, molecular testing, and pathology consultation for oncologists and healthcare providers.
NeoGenomics reported revenues of $168 million, up 7.5% year on year. This result came in 1.7% below analysts' expectations. More broadly, it was actually a strong quarter as it recorded a solid beat of analysts’ EPS estimates and full-year revenue guidance beating analysts’ expectations.
The stock is down 27% since reporting and currently trades at $7.28.
Read our full, actionable report on NeoGenomics here, it’s free.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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