QDEL Rallies 31.7% in Three Months: Can the Stock Keep Climbing Higher?

QuidelOrtho Corporation QDEL has gained 31.7% in the past three months, but the rally now faces a mixed operating backdrop. Core diagnostics businesses are still growing, and cost actions are lifting profitability, even as China and respiratory demand weaken.

The next leg higher may depend on whether those operating gains can offset lower guidance, margin pressure and a heavily leveraged balance sheet.

QDEL’s Core Businesses Show Resilient Growth

Second-quarter 2026 revenues rose 2.8% year over year to $630.9 million. Labs revenues increased 3.6%, Immunohematology grew 1.4% and Point of Care advanced 16.3%.

Excluding China, revenues grew 6% at constant currency. Labs revenues outside China rose 9%, while Immunohematology revenues outside China increased 5%, supporting management’s view that the core franchises remain comparatively resilient.

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QuidelOrtho’s Cost Actions Support Profitability

Adjusted EBITDA increased 21% year over year to $129 million in the second quarter, while adjusted EBITDA margin reached 20.5%. Operating expenses as a percentage of revenues also improved 40 basis points.

The Optimization Plan continues to target facility consolidation, procurement savings and distribution rationalization. QuidelOrtho still expects roughly $50 million of net cost savings through 2027, which could help support profitability while revenue growth remains uneven.

QDEL Faces a Sharp China Slowdown

China revenues fell 18.7% on a reported basis and 23.3% at constant currency in the second quarter. Slower distributor purchases ahead of national in-vitro diagnostics pricing changes were a key drag on the region.

Management observed customers reducing inventories faster than expected after quarter-end and expects China challenges to persist through the remainder of 2026. The timing and implementation of the revised pricing guidelines remain uncertain, limiting near-term demand visibility.

QuidelOrtho’s Lower Outlook Tests the Rally

QuidelOrtho cut its 2026 revenue guidance to $2.52-$2.60 billion from $2.70-$2.75 billion. Adjusted EBITDA guidance dropped to $540-$560 million from $615-$630 million, while adjusted earnings guidance fell to 65-90 cents per share from $1.80-$2.00.

The company also adopted more conservative assumptions for the 2026-2027 respiratory season after lower U.S. positivity rates and softer Southern Hemisphere indicators. That approach reduces expectations for a seasonal rebound and keeps near-term earnings visibility constrained.

QDEL’s Financial Risks Could Limit Further Upside

Adjusted gross margin contracted 130 basis points to 44.4% in the second quarter. QuidelOrtho ended the period with $123.4 million in cash against $2.89 billion of total debt, while cumulative operating cash use reached $143.6 million.

Competition also remains substantial. Abbott Laboratories ABT reported $3.1 billion in second-quarter Diagnostics sales, while Danaher Corporation DHR completed its Masimo acquisition in June, adding specialty diagnostics and patient-monitoring capabilities to its Diagnostics segment.

QDEL’s Bearish Signal Calls for Caution

The 31.7% three-month advance shows that QDEL has already made a sizable move, but sustaining it may require better cash conversion and evidence that cost improvements can overcome China weakness, respiratory volatility and margin pressure.

The stock currently carries a Zacks Rank #5 (Strong Sell), a bearish signal that reflects unfavorable earnings estimate revisions. QDEL has a Value Score of B, suggesting that its valuation characteristics are relatively favorable. However, the Growth Score of F and Momentum Score of F point to weak growth and price-momentum attributes, while the VGM Score of D indicates an unfavorable overall combination of value, growth and momentum factors.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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