It is time for investors to sell shares of Quest Diagnostics , in response to Citi. Analyst Patrick Donnelly downgraded shares of the medical testing company to sell from neutral, citing risks ahead to the corporate earnings per share guidance and 4% to five% long-term growth guide for its base business. “While management has continued to reiterate the $8.50 earnings number for FY23, even when we give the corporate credit for hitting this, we see the multiple as inflated and in danger for compression,” Donnelly wrote in a note to clients Thursday. “The corporate is trading above a 3x P/E spread vs. LH, well above the prior 2-year average of 1.3x which we not think is warranted.” Quest Diagnostics’ lower operational leverage makes the corporate increasingly sensitive to modest cost hikes, Donnelly said. That might pose risks to 2023 estimates. “Though the corporate has seen stable to positive reimbursement in nearly all of its Health Plan agreements and improved pricing overall, we remain cautious,” he wrote. Donnelly also said investors are failing to account for a way a potentially serious flu season could impact Quest Diagnostics. “As flu symptoms screen like COVID, we imagine patients could forgo each routine and esoteric testing in addition to these consumer-initiated tests which traditionally would profit DGX,” he said. “Further, flu tests are more heavily conducted on the Point-of-Care vs. outsourced to labs like DGX and LH.” Despite roughly 14% because the starting of 2022, Citi expects more downside ahead for the stock. The bank trimmed its price goal on the stock to $125 from $145. Which means shares could fall one other 16% from Wednesday’s close. — CNBC’s Michael Bloom contributed reporting
Eli Lilly hits $1 trillion market value, first for health care company
An indication with the corporate logo sits outside of the headquarters of Eli Lilly in Indianapolis, Indiana, on March 17, 2024.Scott...
