Now that Quest Diagnostics' ($DGX) $570 million acquisition of Solstas Lab Partners Group is a done deal, the company's 2014 financial outlook has suddenly grown far more optimistic.
The New Jersey diagnostics giant said it now expects that revenue for 2014 will grow between 2% and 4% compared to 2013. Previously, guidance was for flat revenue down to a 2% decline. Adjusted earnings per diluted share will now hit between $3.95 and $4.15, Quest predicted. Before the acquisition closed, execs targeted adjusted earnings per share of between $3.90 and $4.10. The final adjusted earnings per share could have been even higher, save for a harsh February winter that negatively affected sales.
Quest, which has struggled to generate new revenue, gets to do so through a very smart acquisition. Solstas, which is based in Greensboro, NC, is a commercial laboratory operation with a southeastern United States presence that includes North and South Carolina, Virginia, Tennessee, Georgia and Alabama. Quest's revenue for 2013 landed 3.5% lower than in 2012 and the company has pursued restructuring, acquisitions and the launch of new tests (in the BRCA-related cancer predictive space and other areas) in order to spark upward growth. Reimbursement challenges have also hurt Quest, and the broader diagnostics industry at large, as the development of new tests and testing services hits against a slower or more difficult insurance reimbursement process.
Quest CEO Steve Rusckowski previously said that the merger "will translate into better healthcare for the region because it will improve access to innovative, cost-effective diagnostic information services for patients, physicians and hospitals."
For Quest, the deal also gives it a robust new revenue source that will help make the difference between stagnation and growth in the months ahead.
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