Bloomberg News

Quest Diagnostics Gains on Repurchase Plan: New York Mover

January 26, 2012

(Updates with closing share price in second paragraph.)

Jan. 24 (Bloomberg) -- Quest Diagnostics Inc., the biggest U.S. operator of medical labs, gained the most in three months after fourth-quarter earnings topped estimates and the board approved $1 billion to buy back stock.

Quest rose 7.5 percent to $60.73 at the close in New York for the biggest single-day increase since Oct. 25. Shares of the Madison, New Jersey-based company have increased 12 percent in the past 12 months.

Fourth-quarter profit excluding some items was $1.23 a share as revenue from clinical testing increased, the company said today in a statement. The earnings topped the $1.06 average estimate of 24 analysts surveyed by Bloomberg, helped by revenue gained in purchases last year of Athena Diagnostics Inc. and Celera Corp., Quest said.

“Shares will trade higher this morning due to fourth- quarter earnings upside and the $1 billion repurchase news,” Kevin Ellich, an analyst with Piper Jaffray & Co., wrote in a research note today. “Organic revenue growth still appears to be sluggish, which is a reason we remain at neutral.”

Quest forecast 2012 profit of $4.40 to $4.55, less than analysts’ average estimate of $4.66. The board’s authorization of a $1 billion buyback plan brings the company’s total authorization to about $1.1 billion, Ellich said.

“The company’s initial 2012 guidance -- flat year over year at the mid-point -- was a disappointment; however it likely doesn’t include additional share buybacks,” Jason Gurda, an analyst with Leerink Swann & Co., wrote in a note today.

Gurda also said the forecast may be conservative because of the company’s planned change in chief executive officers; Quest said in October it was seeking a successor to CEO Surya Mohapatra.

--Editors: Bruce Rule, Reg Gale

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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