DGX Financial Analysis

Analysis Date: 1/31/2025

Business Model

Quest Diagnostics generates revenue primarily through diagnostic information services, including clinical laboratory testing and related services

Revenue Sources

• Diagnostic Information Services ($9.61B in 2024, 97% of total revenue)
• Other Revenue Streams ($258M in 2024, 3% of total revenue)

Revenue Distribution by Channel

• Physician Lab Services - High single digit growth in Q4 2024
• Hospital Lab Services - Nearly 3% growth in Q4 2024
• Consumer Initiated Testing - 50% growth in Q4 2024, ~$100M revenue in 2024

Income Statement Analysis

• Strong revenue growth of 14.5% in Q4 2024, with organic growth of ~5%
• Operating margin expanded 210 basis points to 13.8% in Q4 2024
• Full year revenue grew 6.7% with organic growth of ~3%

Balance Sheet Analysis

• Total assets increased 15.2% primarily due to acquisitions including LifeLabs
• Cash position decreased 20% to $549M due to acquisition spending
• Total liabilities increased due to additional debt for acquisitions

Cash Flow Analysis

• Operating cash flow increased 4.8% to $1.33B in 2024
• Significant investing cash outflow of $2.55B primarily for acquisitions
• Financing cash inflow of $1.08B to fund acquisitions

Capital Allocation

Quest increased quarterly dividend by 6.7% to $0.80 per share. Repurchased $150M of shares in Q4 2024. Completed 8 acquisitions including LifeLabs in Canada. Capital expenditures of $425M in 2024, expected to increase to $500M in 2025.

Management Commentary

Delivered impressive revenue growth of nearly 15% in Q4 including 5% organic growth

Completed 8 acquisitions including LifeLabs in Canada

Expanded advanced diagnostics menu with double digit growth in several clinical areas

Making investments in IT modernization and FDA compliance in 2025

Overall Sentiment: Positive and confident about accelerating growth in 2025

Recommendation

Rating: Buy

Reason for Rating: Strong organic growth momentum, successful M&A integration, and margin expansion potential support positive outlook

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/31/2025, 1:25:29 PM