Quest Q2 better than feared, as demand surges for COVID-19 diagnostics
- Quest Diagnostics early Monday reported preliminary second quarter revenues totaling about $1.83 billion, representing a better-than-expected 6% decline from the year prior. The company’s stock was up more than 5% Monday morning.
- The results stem from “stronger than forecasted” recovery in its routine testing business, in addition to “growing demand for COVID-19 testing services.” Overall test orders fell 18% on a year-over-year basis, but clearly would have been much worse without the benefit of coronavirus testing, as the company’s base business reportedly declined 34%.
- However, demand for Quest’s molecular coronavirus diagnostics across the U.S., particularly in the South, Southwest and West, are outpacing its capacity. As a result, Quest said last week non-priority patients are now facing average wait times for their results of four to six days. Rival LabCorp said the same.
In the almost three months since Quest reported first quarter earnings April 22 and discussed test volume declines of up to 60%, the clinical lab network has ramped up COVID-19 antibody testing, marketed return-to-work testing services, received FDA emergency use authorization for an at-home sample collection kit, and expanded its role in drive-thru testing with partners like Walmart and CVS Health.
During that period, the clinical labs lobby fought for more federal support for the sector, and CMS laid out a policy on reimbursing for antibody tests.
As many Americans have returned to more activities in May, June and July, companies like Quest have seen some improvement in routine testing volumes. That return to activity has in some cases aligned within escalating coronavirus outbreaks shortly thereafter, creating even more demand for diagnostics.
The number of COVID-19 diagnostic tests Quest runs daily has also more than doubled since the first quarter earnings report in late April, from 50,000 per day to 120,000, per the company’s most recent update a week ago. Quest also said it plans to further ramp its daily capacity during July to 150,000 molecular diagnostic tests each day, amid surging demand for tests that’s delayed its average turnaround time for results.
As for test makers themselves, Thermo Fisher, Quidel, GenMark Diagnostics, Luminex and Qiagen have all previewed year-over-year sales gains thanks to the coronavirus-driven demand. PerkinElmer added to that trend Monday, saying its quarterly revenues grew 12% amid COVID-19 related products contributing $190 million.
Quest is slated to present its second quarter earnings in full on July 23. A LabCorp spokesperson said the company does not plan to pre-report earnings. LabCorp is scheduled to disclose second quarter results on July 28.
Quest said Monday its adjusted earnings per share will likely fall between $1.39 and $1.42, down from $1.73 last year, after telling investors June 3 the return “could be in the range of breakeven to slightly profitable.” Those values exclude any contribution from outlays from the Coronavirus Aid, Relief, and Economic Security Act, Quest said. Quest and LabCorp disclosed in April they received $65 million and $56 million in initial CARES funds, respectively.