Quest Diagnostics Stock Climbs 27.3% in a Year: What's Fueling It?

Quest Diagnostics DGX has shown impressive momentum in the past year, with its shares rallying 27.3%. The performance outpaces the industry’s 5.9% rise and the S&P 500 composite’s 12.3% gain.

Carrying a Zacks Rank #2 (Buy) at present, the renowned clinical laboratory is benefiting from its investments in Advanced Diagnostics, which help deliver and scale innovative services that enhance patient care and drive growth. Quest Diagnostics’ strategy includes generating growth through value-creating acquisitions, utilizing disciplined investment criteria with a high emphasis on accretive outreach purchases and other independent labs. A strong focus on operational excellence also adds to the stock’s appeal.

Headquartered in Secaucus, NJ, Quest Diagnostics delivers a wide range of diagnostic information services to patients, clinicians and healthcare organizations. It serves as a key provider of reference testing for approximately half of the hospitals in the United States, and also offers physician services reimbursed by Medicare’s physician fee schedule, subject to yearly adjustments. Through targeted acquisitions, the company aims to grow its top line by 1-2% annually.

Catalysts Behind DGX’s Growth

Quest Diagnostics’ rally is largely driven by its continued strength in Advanced Diagnostics, particularly in areas like advanced cardiometabolic, autoimmune, brain health, oncology and women's and reproductive health. Robust demand for Alzheimer's disease risk detection blood tests is driving growth in Brain Health. The company aims to build on this momentum by introducing new biomarkers to help providers better assess Alzheimer's and other forms of dementia. It also expanded its women and reproductive health offerings with a new self-collection option for a specimen for HPV cervical cancer screening at a doctor's office. Quest Diagnostics anticipates generating revenues from its Haystack minimal-residual disease (MRD) test this year.

This year, the company is focused on maximizing productivity from the eight acquisitions completed in 2024. These transactions include LifeLabs in Canada, Allina Health, a leading non-profit health system serving Minnesota and western Wisconsin, and outreach lab assets from Ohio Health and University Hospitals. The acquisition of PathAI Diagnostics further advanced the company’s push into digital pathology and AI to improve the diagnosis of cancer and other diseases.

Quest Diagnostics is also gaining from strong customer relationships. New health plan partnerships with Elevance Health and Sentara Health Plans, which became effective on Jan. 1, 2025, are driving strong volume and revenue gains by expanding into new geographies. The company also became the first independent national lab to be selected for the Optum Health preferred lab network (PLN), gaining access to more than 85,000 Optum-employed, contracted and affiliated physicians. Further, hospitals are increasingly leveraging Quest Diagnostics’ strategic offerings — offered through its reference testing business, Collaborative Lab Solutions and outreach lab acquisitions — to access high-quality diagnostics without having to maintain a lab.

In terms of operational efficiency,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.

What Ails DGX Stock?

With the new U.S. administration in place, any changes in U.S. healthcare regulation could have a material adverse effect on Quest Diagnostics’ business. An escalating debt level against cash reserves also adds to the risks.

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 remained unchanged.

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.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Cardinal Health CAH and Cencora COR.

Phibro Animal Health has an estimated long-term earnings growth rate of 26% compared with the industry’s 15.7%. 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 59.8% compared with the industry’s 14.5% growth in the past year.

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

Cardinal Health, currently carrying a Zacks Rank #2, has an estimated long-term earnings growth rate of 10.9% compared with the industry’s 9.9% growth. Shares of the company have surged 70.2% compared with the industry’s modest 1.1% gain. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 10.3%.

Cencora, carrying a Zacks Rank #2 at present, has an earnings yield of 5.3% compared with the industry’s 3.7%. Shares of the company have rallied 32.4% against the industry’s 14.4% decline. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6%.

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

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