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Quest Diagnostics Raises Dividends & Buybacks

Quest Diagnostics Inc. (DGX) is the world’s leading provider of diagnostic information services, serving approximately one-third of the U.S. adult population and half of U.S. physicians and hospitals.

The company generated the vast majority of its revenue (96.8%) from its Diagnostic Information Services (DIS) segment, where 37% of its revenue came from healthcare insurers, 11% from government payers, 38% from client payers, and 11% from patients in 2020. The remaining 3.2% of its revenue came from its Diagnostic Services (DS) segment.

Better Than Expected Q4 Results

Quest Diagnostics reported fourth quarter revenue that rose 55.4% to $3 billion, beating consensus estimates by $80 million, along with non-GAAP earnings of $4.48 per share, beating consensus estimates by 24 cents. Cash from operations rose 61.3% to $2 billion and cash and equivalents ended the year at about $1.16 billion.

While investors are concerned about the so-called ‘COVID-19 cliff’ when testing falls off, Citi analyst Ralph Giacobbe sees a potential win-win for insurers and labs to gain greater visibility with a trade-off of lower COVID-19 reimbursement in exchange for more stable and positive longer-term pricing escalators.

The company raised its quarterly dividend by 10.7% to $0.62 per share, which represents a 1.93% forward yield. The dividend is payable on April 21, 2021 to shareholders on record as of April 7, 2021. The company also announced a $1 billion increase in its share repurchase authorization.

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