On Tuesday, Morgan Stanley (NYSE:MS) adjusted its stance on Quest Diagnostics (NYSE:NYSE:DGX), elevating the stock from Equalweight to Overweight and increasing the price target to $172 from the previous $145. The move reflects the firm's growing confidence in the company's medium and long-term growth prospects as the healthcare sector, particularly clinical labs, continues to experience robust utilization trends.
Quest Diagnostics has not yet provided official guidance for 2025, but the company's expectations align with its long-term targets set for 2023-2026. These include approximately 3% organic top-line growth, high-single-digit percentage earnings growth, and other positive outlook components. The company anticipates a mid-single-digit revenue compound annual growth rate (CAGR), a 1-2% contribution from mergers and acquisitions, a 75-150 basis points margin expansion, and a high-single-digit earnings CAGR.
The analyst noted that while previously they were observing the company's recovery from the post-COVID period, the current environment suggests a strong utilization landscape that appears sustainable. This backdrop, coupled with the company's insulation from potential negative impacts of election outcomes, positions Quest Diagnostics favorably in the market.
The healthcare sector, and clinical labs in particular, have been commenting on persistent robust utilization trends, which are expected to continue into 2025. Quest Diagnostics is anticipated to benefit from these trends, bolstering the firm's decision to upgrade the stock.
Morgan Stanley's updated view on Quest Diagnostics underscores the company's reaffirmed long-term outlook, which remains in line with the analyst's expectations for the sector's growth trajectory. The revised price target of $172 reflects the analyst's optimistic assessment of Quest Diagnostics' performance potential in the coming year.
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