Quest Diagnostics (NYSE:DGX) was initiated by Jefferies with a Buy rating and a price target of $185. Despite revenue still trailing the pandemic-era peak, the analysts highlighted a promising trajectory for growth fueled by strategic pricing, new contract wins, and industry consolidation.
Quest Diagnostics’ year-to-date performance signals a clear pathway to not only recover but surpass pre-pandemic revenue levels in the coming years. Recent contracts with Elevance and Sentara Health, along with sustained pricing power, are expected to drive mid-single-digit revenue growth through 2026.
The company’s valuation, trading at approximately 11.5x EBITDA, sits above its 10-year average but still reflects a notable 24% discount to the S&P 500. Jefferies pointed to several factors that could narrow this gap, including the impact of delayed PAMA regulations, regional expansion through acquisitions such as LifeLabs, and growth opportunities in oncology diagnostics, specifically the Haystack platform.
Mergers and acquisitions are expected to contribute over 2% annual growth through 2026, though execution remains a potential risk. However, continued success in outreach lab acquisitions and a focus on industry consolidation position Quest Diagnostics as a key player poised for upward revaluation.
With a combination of strategic initiatives and industry tailwinds, Quest Diagnostics appears set to unlock significant growth and shareholder value in the years ahead.