Quest Diagnostics Raises Outlook, But Warns Of Tariff And Medicare Act Risks
However, the diagnostic test provider flagged potential headwinds from ongoing tariffs and the significant financial impact if the Protecting Access to Medicare Act (PAMA) is not deferred, setting the stage for a watchful eye on legislative and trade developments.
For the second quarter of 2025, the company reported sales of $2.76 billion, a 15.2% increase year-over-year, exceeding the consensus of $2.73 billion. Adjusted earnings reached $2.62 per share, up 11.5%, also surpassing the consensus of $2.58.
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'Demand for our innovative clinical solutions and expanded business from enterprise accounts complemented growth from acquisitions. We also realized productivity gains as we continued to deploy automation and digital technologies across our operations. Given our performance in the quarter and continued utilization trends, we are raising our full-year 2025 guidance,' said Jim Davis, chairman, CEO, and president.
Revenue per requisition decreased by 0.4%, requisition volume increased 16.3% and organic requisition volume improved by 2.1%. Adjusted Operating income increased 17.3% to $466 million, while the margin improved marginally from 16.6% to 16.9%.
During the earnings conference call, a Quest Diagnostics executive indicated that the company experienced some negative impact from tariffs in the second quarter and anticipates this will continue through the third and fourth quarters.
Furthermore, the executive reportedly stated that if the Protecting Access to Medicare Act (PAMA) is not deferred for another year, the financial impact to Quest Diagnostics would be approximately $100 million.
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This suggests that Quest Diagnostics is facing a dual challenge: ongoing costs related to current tariffs and a significant potential financial hit if PAMA provisions are not postponed. The company's future financial performance will likely be closely tied to developments on both of these fronts.
Outlook: Quest Diagnostics revised 2025 guidance for revenue from $10.70 billion-$10.85 billion to $10.80 billion-$10.92 billion versus the consensus of $10.79 billion.
The company expects adjusted earnings of $9.63-$9.83 compared to prior guidance of $9.55-$9.80 and the consensus of $9.70.
Reflecting the positive sentiment from the company's strong results and raised outlook, investment firm William Blair provided its assessment, 'Quest continues to showcase itself as a predictable revenue and earnings grower, and we remain confident in the updated 2025 guide and longer-term targets.'
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