Is Quest Diagnostics Stock a Smart Pick for Your Portfolio Now?

Quest Diagnostics Inc. DGX is investing in advanced diagnostics to deliver and scale innovative services that improve patient care and drive growth. The company’s growth strategy includes pursuing value-creating, strategically aligned acquisitions using a disciplined investment approach. A strong focus on cost management adds to the appeal.Meanwhile, the company continues to navigate a shifting U.S. healthcare system marked by several inherent risks. A rising debt burden is also concerning.

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In the past year, this Zacks Rank #2 (Buy) stock has rallied 27.3% compared with the industry’s 6.6% growth and the S&P 500 composite’s 11.7% rise.

The renowned provider of diagnostic information services has a market capitalization of $20.05 billion. Quest Diagnostics has an earnings yield of 5.4% compared with the industry’s yield of 4.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 2%.

Key Drivers for DGX Stock

Strong Potential of Advanced Diagnostics: In Advanced Diagnostics, DGX is focused on five major clinical areas — advanced cardiometabolic, autoimmune, brain health, oncology, and women's and reproductive health — to enable growth across its customer channels. In the first quarter of 2025, each of these areas delivered solid double-digit growth, significantly contributing to the total revenues. Brain Health gained from robust demand for AD-detect blood tests for assessing Alzheimer's disease risk, with plans underway to expand the portfolio with new biomarkers for Alzheimer's and other forms of dementia.

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In women's and reproductive health, Quest Diagnostics introduced a new self-collection option for a specimen for HPV cervical cancer screening at a doctor's office. The company also started receiving commercial orders for the Haystack MRD test for assessing the early risk of cancer recurrence. It anticipates generating revenues from the test this year.

Progress With Acquisition Strategy: Quest Diagnostics puts a high emphasis on accretive outreach purchases, as well as other independent labs, to support its growth objectives. In 2024, the company completed eight acquisitions, all of which align with its criteria for growth, profitability and returns. The addition of LifeLabs strengthened its foothold in the Canadian market and created new growth opportunities. The company acquired Allina Health, a leading nonprofit health system serving Minnesota and western Wisconsin, and the laboratory business of three physician groups in New York.

To increase the adoption of AI and digital pathology, Quest Diagnostics acquired PathAI Diagnostics. In addition, it completed the acquisition of lab assets from Ohio Health and University Hospitals, two leading nonprofit health systems in Ohio. For 2025, Quest Diagnostics plans to slow its acquisition pace and prioritize maximizing productivity from last year’s completed deals.

Strategic Imperative to Drive Operational Excellence: The company 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. Quest Diagnostics is also automating several areas of its laboratories, from tuberculosis testing to cervical cancer screening.

The company also recently announced Project Nova, a new IT initiative to modernize its systems architecture, reduce IT costs over the long term and support its ability to optimize data insights and GenAI. In March 2025, DGX announced a collaboration with Google Cloud to streamline data management and employ GenAI to personalize customer and employee experiences.

Concerns for DGX Stock

Escalating Debt Level: As of the end of the first quarter of 2025, the long-term debt totaled $5.86 billion, while cash and cash equivalents were just $188 million. The current portion of the debt was $1 million. Moreover, a higher debt level induces higher interest payments, which come along with the risk of failure to pay the same. The times interest ratio, which indicates the company’s capacity to pay interest, slipped 0.6% sequentially to 6.3%.

Unstable Macroeconomic Backdrop: Government payers, such as Medicare and Medicaid, have taken steps to reduce the utilization and reimbursement of healthcare services, including clinical testing services. Further, the industry-wide trend of consolidation has led to larger insurance plans with significant bargaining power, making it difficult for Quest Diagnostics to negotiate fee arrangements and possibly limiting access to its newer innovative solutions. Also, with the new U.S. administration in place, any regulatory changes could have a material adverse effect on the company’s business.

DGX Stock Estimate Trend

The Zacks Consensus Estimate for Quest Diagnostics’ 2025 earnings per share (EPS) has increased 1 cent to $9.70 in the past 30 days.

The consensus estimate for the company’s 2025 revenues is pegged at $10.78 billion. This suggests 9.2% growth from the year-ago reported number.

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 49.8% compared with the industry’s 14.3% 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 74.1% compared with the industry’s modest 0.9% 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 34.1% against the industry’s 14.5% decline. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6%.

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Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report

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

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