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Quest Expects Q3 Revenues, EPS to Fall Short of Analyst Estimates

NEW YORK (GenomeWeb News) – Quest Diagnostics today pre-announced third quarter earnings results that are expected to fall short of consensus Wall Street estimates.

For the three months ended Sept. 30, the company said that revenues from continuing operations are anticipated to be $1.79 billion, a 2 percent dip from the year-ago period and below analyst expectations of $1.84 billion. Its earnings per share is expected to be $2.66, up from $.98 a year ago. On an adjusted basis EPS is estimated at $1.02, short of Wall Street estimates of $1.20.

Quest said that underlying test volume in the quarter for Diagnostic Information Services softened late in the quarter and was down 1 percent compared to the year-ago period. Also, Diagnostic Information Services, excluding recent acquisitions, was down 3 percent as a result of pressure from government and commercial payers, the firm said, adding that increased denial rates for certain molecular tests contributed about a 0.5 percent decrease in the segment.

Quest's Diagnostic Solutions business was up 4 percent year over year, and overall, acquisitions contributed 2 percent to growth during the quarter, the firm said. It added that its cost-reduction program remained on track.

"Early in the third quarter, we were encouraged by revenue performance that was in line with our expectations," Quest President and CEO Steve Rusckowski said in a statement. "However, later in the quarter, revenues deteriorated, leading to results that did not meet our expectations."

In a research note today, Goldman Sachs analyst Isaac Ro called the results "disappointing as management had previously lowered revenue expectations twice in 2013, and we believed that easing comps would help provide a floor on top-line growth in the back half of the year."

Quest is scheduled to release its full Q3 results on Oct. 17, during which time Ro said that he will expect greater clarity on the source of the late quarter volume decrease, as well as " management's visibility on future reimbursement pressure including revenue collection on 'certain molecular tests.'"

Also, he anticipates the company will provide further details about the impact of market share dynamics on the results. Ro maintained a Buy rating on Quest.

In Thursday morning trade on the New York Stock Exchange, shares of Quest were down 4 percent at $59.12.

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