COLUMBUS, Ohio - Quest Diagnostics (NYSE: NYSE:DGX), a major player in diagnostic information services, and OhioHealth, a recognized not-for-profit health system, have entered into a definitive agreement in which Quest will acquire certain assets of OhioHealth's outreach laboratory services. This move aims to expand access to innovative and cost-effective lab services in Ohio.
The acquisition will allow providers and patients in Ohio to benefit from Quest's extensive test menu, widespread patient service sites, comprehensive health plan coverage, and potentially lower out-of-pocket expenses for many services. OhioHealth's outreach testing will largely transition to Quest's full-service laboratory in Pittsburgh following the acquisition's completion, while OhioHealth will maintain ownership and operation of its hospital labs.
Chris Clinton, President of OhioHealth Regional Market, emphasized the importance of continuing to provide high-quality, value-driven care to patients. Quest's specialization and scale are expected to ensure ongoing access to quality lab services at a more affordable cost for patients. Interim Vice President of Shared Services at OhioHealth, Juanita Swickard, echoed the sentiment, highlighting the anticipated cost savings and sustained care quality through the partnership with Quest.
Jim Davis, Chairman, CEO and President of Quest Diagnostics, noted that the agreement showcases Quest's appeal to top-tier health systems looking to enhance their laboratory services. The transaction aligns with Quest's growth strategy, which includes expanding through lab acquisitions, and is set to bolster Quest's footprint in Ohio.
The completion of this transaction is anticipated in the third quarter of 2024, subject to customary regulatory approvals. Financial terms have not been disclosed.
OhioHealth has been serving the community since 1891 and comprises a network of hospitals, ambulatory sites, and health services across a 50-county area. Quest Diagnostics, on the other hand, provides diagnostic insights to support health outcomes and serves a significant portion of American adults and healthcare professionals each year.
This acquisition is based on a press release statement and is intended to enhance the accessibility and affordability of lab services for Ohio residents.
In other recent news, Quest Diagnostics has been making strategic acquisitions and forming new partnerships. The company has entered into definitive agreements to acquire Canada's LifeLabs for $985 million and select laboratory assets from Allina Health.
Analysts from Baird have raised the price target for Quest Diagnostics shares to $153 from $145, maintaining a Neutral rating but with a positive outlook, reflecting the inclusion of the Allina model and the recent announcement of a new deal with LifeLabs.
The company also finalized the acquisition of PathAI Diagnostics' laboratory assets, aiming to leverage artificial intelligence in disease diagnosis. Citi has maintained a neutral rating on Quest Diagnostics, forecasting potential margin improvements by 2024. The company has also announced a quarterly cash dividend of $0.75 per share.
In leadership changes, Robert B. Carter, the current Executive Vice President and Chief Information Officer at FedEx Corporation (NYSE:FDX), has joined Quest Diagnostics' Board of Directors, and Murali Balakumar has been appointed as Senior Vice President and Chief Information and Digital Officer. These are the recent developments in Quest Diagnostics' operations.
InvestingPro Insights
As Quest Diagnostics (NYSE: DGX) gears up to enhance its lab services through the acquisition of assets from OhioHealth's outreach laboratory services, its financial health and market performance offer valuable insights into the company's stability and growth prospects.
InvestingPro Tips for Quest Diagnostics highlight management's confidence in the company, as evidenced by aggressive share buybacks and a consistent track record of raising dividends for 12 consecutive years. These actions, combined with a history of maintaining dividend payments for 21 consecutive years, underscore the company's commitment to shareholder returns.
From a valuation perspective, Quest Diagnostics trades at a P/E ratio of 18.38, with an adjusted P/E ratio of 17.21 for the last twelve months as of Q1 2024. While this indicates a premium relative to near-term earnings growth, the company's low price volatility may appeal to investors seeking stability in their portfolio. Moreover, the stock is trading near its 52-week high, with a price that is 95.01% of the peak, reflecting strong investor confidence.
Key InvestingPro Data metrics for Quest Diagnostics reveal a solid financial foundation, with a market capitalization of 15.37B USD and a robust gross profit margin of 33.08% for the last twelve months as of Q1 2024. The company's revenue, however, has seen a slight decline of 3.29% over the same period, indicating a need for strategic initiatives like the OhioHealth acquisition to drive future growth.
Investors and analysts are keeping a close eye on Quest Diagnostics as it continues to execute its growth strategy. With analysts predicting profitability for the company this year and a dividend yield of 2.17%, Quest Diagnostics appears to be positioning itself for sustained success in the competitive healthcare industry.
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