Quest Diagnostics, Inc. (DGX)

Baby boomer population is getting old and I expect the lab testing to increase in the future (with Quest being the top dog)...I bought this in early Oct 2006 when there was a major drop in price (over 10%) with the news of the loss of the UnitedHealthcare contract. Hoping I bought low and will reap the benefits.

DGX has a trailing PE of 22.3. That is a little higher than its average PE over the past year but not outrageous. It pays a dividend of 40 cents. It is the largest company of its type so it has economies of scale. It is in a relatively "safe" medical industry. People need to be tested for certain medical situations. With people living longer and the baby boomers getting older, this company should continue to do well for at least 5 years. It will probably do will for 10 plus years.

they did the right thing, accepting the UNH bid would have been a bigger burden than if they just let it go...their competitor will be drained by UNH and is trading at a premium to the DGX

Quest is the largest provider of diagnostic testing and information services, with nearly 25% market share, which include esoteric testing, gene-based testing, anatomic pathology services and testing for clinical trials. The company has a network of 35 primary testing facilities and more than 2,000 service sites in 46 states. It is estimated that per year it performs personal health testing on more than 100 million patients and processes more than 250 million diagnostic laboratory tests. Routine testing generates 80% of net sales, esoteric testing 17%, while clinical trials 3%.

Diagnostics accounts for almost 2%-3% of health care costs but impacts approximately 60-70% of medical decisions. Coupled with a favorable aging demographic trend, the laboratory services industry is poised for a steady growth of 7-8% per annum till 2010. The $40 billion clinical laboratory market comprises of hospital-based labs accounting for about 56% of the market, independent commercial labs making up for 36%, while the balance being physician-office labs.

United Healthcare, until it transferred the contract to LabCorp, represented approximately 5% of Quest's business and given LabCorp's recent victory, it is expected that this loss can prove to be a disadvantage to the company. However, the earlier acquisition of LabOne in December 2005 and Focus Diagnostics in July 2006 has given Quest a large reference lab located in Southern California and GenomEx, an independent genetic laboratory testing service. These acquisitions are expected to boost the future sales starting 2007 and fill up the vacuum created by United Healthcare’s loss.

Sales have grown at a compound annual growth rate of 10.2% over the past 4 years driven by organic growth and acquisitions. Revenues from continuing operations increased 14.9% for the year ended 2006. The acquisition of LabOne contributed revenue growth of approximately 8%, while share of Focus Diagnostics was 1.5% since July 2006. As the management anticipates a 12-14% revenue growth in the coming two years, Quest seems to be a good investment proposition.

My doctor wants blood from me on a routine basis these days, and there is nothing physically wrong with me. Physicians are dependent upon diagnostic testing for nearly every condition, and new tests are developed every year. DGX is on sale @ 52 wk low, good ROE, recession proof, and a discount to peers. Expect them to continue to grow faster than other S&P stocks.

Made bottom, 1 down 5 up

DGX does medical diagnostics tests. As the baby boomers retire more and more medical diagnostic tests will be done. Furthermore, it is cheaper for insurance companies to do a test and screen early for a disease, ie. cancer, than wait and pay for treatment later. Therefore insurance companies will push more diagnostic tests and push demand. Furthermore, investors are not liking the purchase today of a smaller competitor and have dropped the share price 5% today. As DGX consolidates by eating up competitors it gets stronger in the long term, so I will buy on this dip in price.

cream of the crop in lab testing

Market has rightly punished price for loss of customer, but valuation seems so low to me that given favorable demographics should be a good long term bet...fwiw, folks in the doctor's office i know greatly prefer their service to that of their competition.

Any easy winner over the years... Maybe it will go down further but no point in trying to time the bottom as people head out for more and more medical tests everyday...

Exorcised UNH, assimilated Ameripath, mid-year guidance of 6.1 to 6.2 B for 2007 will end up at 6.6/6.7, operating margins are going back up, Ameripath should fuel growth for 2008 and beyond, and now, I've read that the sales reps can now concentrate on new business, instead of keeping old.

An ageing population in combo with more standardized lab testing for many medical diagnostics

Quest lost a major sales outlet 7% of total sales but the company was trying to shed low margin customers and, while large, the lost contract would have been minimal margin

great company in its field. ression proof, stable,being number 1 in testing.

diagnostic testing, information and services, providing insights

With the waxing and waining of winter ailments, this one will rise to the occasion.

A sure thing coming up right behind death and taxes: illness. As one of the biggest lab/diagnositic services in the country, Quest has solid earnings and ddividends and an 8% NET profit margin. Not too shabby. Having said all this, I'd also have to recommend their biggest competitor, labcorp, whose financials look even stronger.

outlooks great

bread and butter company in health care. should do well at hard times.