Is it the Right Time to Retain DGX Stock in Your Portfolio?

Quest Diagnostics DGX is well-poised to grow in the coming quarters owing to its solid growth momentum in the physician, hospital and consumer channels. Broader adoption of the company’s Advanced Diagnostics offerings, across five key clinical areas, also supports the growth outlook. Further, Quest Diagnostics continues to use automation and AI to improve the quality and productivity of its operations.Still, elevated debt and ongoing uncertainty around reimbursement and costs could weigh on results.

In the past year, this Zacks Rank #3 (Hold) stock has rallied 33.9% compared with the industry’s 19.4% growth and the S&P 500 Composite’s 21.5% rise. 

The renowned provider of diagnostic information services has a market capitalization of $26.68 billion. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 5.77%.

Factors Favoring DGX

Growth Momentum in the Base Business: Quest Diagnostics continues to address the needs of physicians, hospitals and consumers through broader access, clinical innovation and offering more integrated solutions. In the second quarter of 2026, physician channel revenues increased in the high single-digit range, supported by new customer wins, higher business with existing customers and growth in regions where the company expanded health plan access and completed acquisitions. The Fresenius Medical Care collaboration is also broadening Quest Diagnostics’ capabilities in kidney care.

Hospital channel revenues grew at a double-digit rate, primarily from Co-Lab Solutions with Corewell Health. Reference-testing revenues increased from both the first quarter and the prior-year period. The consumer-testing platform, QuestHealth.com, continued to generate revenue growth, supported by demand for wellness panels and newer services such as thyroid testing. The platform is also attracting consumer, wearable and wellness partners through flexible technology integration.

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Strong Potential of Advanced Diagnostics: Quest Diagnostics is expanding advanced diagnostics across cardiometabolic and endocrine, autoimmune, brain health, oncology and women’s and reproductive health. Several of these areas delivered double-digit revenue growth in the second quarter of 2026. Demand remained elevated for ApoB, Lp(a) and liver fibrosis tests, while the company continued to grow its analyzer solution for autoimmune disorders.

In brain health, the AD-Detect portfolio again produced double-digit growth. In oncology, New York State approved Haystack minimal residual disease, allowing commercial expansion across all 50 states. Quest Diagnostics also integrated selected cancer tests with Flatiron Health’s OncoEMR Molecular Profiling Integration platform. A pilot program with American Oncology Network is expected to support a broader rollout to Flatiron’s 4,700 clinicians and other providers later in 2026.

Strategic Imperative to Drive Operational Excellence: Quest Diagnostics’ Invigorate program now targets 3% annual cost savings and productivity improvements. The company is using automation and AI across laboratory and administrative processes to offset labor, benefit and reimbursement pressures while improving service quality. During the second quarter, Quest Diagnostics expanded AI-enabled cervical cancer screening and front-end specimen-processing automation to additional laboratories.

The company also launched IntelliDraw to guide specimen collection at physician offices and plans to introduce an AI-based supply tool at patient service centers. Project Nova remains a multi-year effort to transform order-to-cash processes, with higher spending expected in the second half of 2026 and the first implementation wave planned for fall 2027.

What Ails DGX?

Elevated Debt Level: As of June 30, 2026, the company’s long-term debt was $5.63 billion and cash and cash equivalents totaled $626 million. The current portion of long-term debt declined to $10 million after the company repaid $500 million of notes due in June and issued $500 million of 5.00% notes due in 2036. Interest expense totaled $126 million in the first half. Elevated debt could constrain financial flexibility as the company continues investing in acquisitions, automation and Project Nova.

Unstable Reimbursement and Cost Backdrop: Quest Diagnostics remains exposed to changes in government reimbursement, health policy and payer bargaining power. Management continues to assume a 30-basis-point (bps) revenue impact in 2026 from the expiration of enhanced Affordable Care Act exchange subsidies. Exchange requisitions were down about 8%, although higher tests per requisition and payer mix kept related revenues roughly flat through the second quarter. Second-quarter cost of services increased 10.9% year over year, while adjusted operating margin declined 40 bps to 16.5%.

DGX Stock Estimate Trend

The Zacks Consensus Estimate for Quest Diagnostics’ 2026 earnings per share (EPS) is projected to increase 13.2% to $11.15.

The consensus mark for 2026 revenues is pegged at $12.01 billion, suggesting 8.9% growth from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Globus Medical GMED, Veracyte VCYT and Teleflex TFX.

Globus Medical has an earnings yield of 5.8% compared to the industry’s negative 1.7% yield. Its earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 27.9%. GMED shares have rallied 37.1% against the industry’s 4.2% decline over the past year.

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

Veracyte, sporting a Zacks Rank #1, has an earnings yield of 4.6% against the industry’s negative 1.7% yield. Shares of the company have risen 34.8% against the industry’s 4.2% decline. VCYT’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 41.8%. 

Teleflex, carrying a Zacks Rank #2 (Buy), has an estimated long-term earnings growth rate of 20.7% compared with the industry’s 12.8% growth. Its earnings beat estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 3.2%. TFX shares have rallied 4.3% against the industry’s 4.3% decline over the past year.

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

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