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Quest's Q1 Revenues Fall 6 Percent as It Misses Estimates on Top and Bottom Line

NEW YORK (GenomeWeb News) – Quest Diagnostics today reported that its revenues in the first quarter dropped 6 percent year over year as it missed the average analyst estimate on both the top and bottom lines.

For the three months ended March 31, the firm brought in $1.79 billion in revenues, down from $1.91 billion a year ago and short of the $1.86 billion expected by Wall Street.

Quest said that revenues from diagnostic information services decreased almost 7 percent year over year. Volume, as measured by the number of requisitions, retreated 3 percent, with 2 percent of that due to fewer business days and .5 percent due to the comparison with an unseasonably mild winter in 2012.

In January, Quest completed its acquisition of the clinical outreach laboratory business of UMass Memorial Medical Center, and the firm said that deal added about 1 percent in both volume and revenue growth in the first quarter.

Revenue per requisition was down more than 3 percent year over year, driven mostly by reduced reimbursement.

Net income attributable to Quest's common stockholders was $135.8 million, or $.85 per share, compared to $159.1 million, or $.99 per share, a year ago. Adjusted income from continuing operations was $142.9 million, or $.89 per share, compared to $168.5 million, or $1.05 per share, during the first quarter of 2012.

The average analyst estimate was $1.03 per share.

Quest's SG&A expenses in the quarter were trimmed 7 percent year over year to $447.9 million from $483.3 million.

"Our results for the quarter reflect our previously stated expectation for revenue softness during the first half of 2013, with gradual improvement throughout the remainder of the year," Quest President and CEO Steve Rusckowski said in a statement. "Contributors to the first quarter's revenue softness include a challenging year-over-year comparison; continued weakness in healthcare utilization; and reductions in reimbursement driven by Medicare and commercial payers.

"Our primary focus in 2013 is driving operational excellence and restoring growth, which are two elements of our five-point strategy," he continued. "Additionally, we are refocusing on diagnostic information services and delivering disciplined capital deployment."

Last week, Quest completed the sale of its HemoCue point-of-care diagnostic business to Danaher's Radiometer for $300 million. Funds from the sale will be redirected toward share repurchases.

"In addition, we announced the planned acquisition of outreach testing operations of Dignity Health in California and Nevada, and expect to complete additional fold-in acquisitions, consistent with our goal of contributing 1 to 2 percent revenue growth per year through strategically aligned, accretive acquisitions," Rusckowski said.

Quest ended the quarter with $133.6 million in cash and cash equivalents.

For full-year 2013, the company said that revenues are expected to "approximate the prior year level," compared to previous guidance of flat to 1 percent growth year over year. Adjusted EPS is anticipated to be in the $4.35 to $4.55 range.

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