Quest Diagnostics: A Search for Profits

01/30/2020 5:00 am EST

Focus: HEALTHCARE

Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Quest Diagnostics (DGX) — which provides diagnostic testing for patients — is our latest breakout stock, observes technical expert Leo Fasciocco, editor of Ticker Tape Digest.

With annual revenues of $7.5 billion, the company operates through two businesses: Diagnostic information services and diagnostic solutions.

The firm delivers diagnostic testing for customers that include patients, clinicians, hospitals, integrated delivery networks, health plans, employers and accountable care organizations. Its diagnostic Solutions group includes its risk assessment services business.

Net for the fourth quarter should be strong, up 18% to $1.60 a share from the $1.36 the prior year. Analysts are forecasting a 3% increase in net for 2019 to $6.49 a share from the $6.31 the prior year.

We see good chances for an upside surprise. The company beat the consensus estimate the past three quarters by 4 cents a share, 4 cents and 4 cents.

This year, DGX should show a modest 4% increase in net to $6.73 a share from the expected $6.49 for 2019. Meanwhile, net for the first quarter of 2020 should climb 9% to $1.52 a share from the $1.40 the prior year.

The stock went into a sharp pull back to $80 but has since bounced back and is in range to top its high in 2018. Technically, the stock has just broken out from its 10-week flat base.

The breakout clears a breakpoint zone. It comes with expanding volume and a widening of the daily spread. That is very bullish. The stock's momentum indicator is solidly bullish.   

We are targeting the stock for a move to $125 a share within the next few months — or sooner.A protective stop can be placed near $106.

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