Jefferies Sees Bright Future for Quest Diagnostics Fueled by Growth Indicators
Jefferies initiated coverage on Quest Diagnostics (NYSE:DGX) with a Buy rating, assigning a price target of $185. While current revenues still lag behind pandemic peaks, analysts see a promising growth trajectory supported by strategic pricing, new contracts, and industry consolidation.
Quest Diagnostics’ year-to-date performance reveals a clear roadmap not only to recovery but to surpass pre-pandemic revenue metrics in the coming years. Recently secured contracts with Elevance and Sentara Health are expected to underpin mid-single-digit revenue growth through 2026, supplemented by ongoing strategic pricing initiatives.
The company’s valuation currently stands at about 11.5x EBITDA. Although this is above its 10-year average, it still reflects a notable 24% discount to the S&P 500. Jefferies highlights factors like delayed PAMA regulations, regional expansion through acquisitions such as LifeLabs, and specific growth opportunities in oncology diagnostics, particularly via the Haystack platform, that could narrow this valuation gap.
Mergers and acquisitions are projected to add over 2% annual growth through 2026, although execution remains a potential risk. Continued success in outreach lab acquisitions and a concentration on industry consolidation positions Quest Diagnostics as a critical player positioned for upward revaluation.
With a mix of strategic initiatives and industry momentum, Quest Diagnostics is poised to unlock significant growth and shareholder value in the years ahead.