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Taking Stock of Quest Diagnostics’ Recent Acquisitions

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DIS business

Quest Diagnostics’ (DGX) diagnostic information services (or DIS) business accounts for more than 95% of the company’s total revenues. It is characterized by a high volume of relatively low-dollar transactions. Under DIS, Quest provides clinical testing and other services. Major customer groups for DIS include healthcare insurers, government payers, client payers, and patients.

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Recent acquisitions

So far in 2018, Quest Diagnostics has made two acquisitions. In February 2018, Quest acquired Mobile Medical Examination Services for a total consideration of $142.0 million. The latter is a leading provider of home-based health risk assessments and related services. In June 2018, Quest Diagnostics acquired Cape Cod Healthcare’s outreach laboratory service business for a consideration of $35.0 million.

In May 2018, Quest Diagnostics entered into a long-term strategic partnership with UnitedHealthcare (UNH). This partnership is focused on creating more personalized care recommendations and a simpler consumer experience for people who are enrolled in UnitedHealthcare plans. Beginning in January 2019, Quest will be a contracted, participating provider of clinical laboratory testing services for all of UnitedHealthcare plans excluding existing lab capitation arrangements across the US.

Quest’s long-term debt-to-equity ratio stands at 0.65. In comparison, the long-term debt-to-equity ratio of peers Illumina (ILMN), Johnson & Johnson (JNJ), and Thermo Fisher Scientific (TMO) stand at 0.22, 0.47, and 0.67, respectively.

We’ll look at Quest Diagnostics’ valuation metrics and analysts’ recommendations in the next part.

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