Quest Diagnostics reported solid year-over-year revenue growth in QQ3 2025, supported by stronger testing volumes and favorable mix, with revenue of $2.816 billion, up 13.18% versus the prior-year period. The quarter delivered an EBITDA of $386 million and operating income of $386 million, underscoring a mid-teens margin profile (operating margin ~13.7%) despite ongoing cost pressures. Net income totaled $245 million with basic EPS of $2.18 (diluted $2.16), reflecting a positive but modest net profit expansion on a year-over-year basis (YoY net income +8.4%), tempered by a QoQ decline of roughly 12.8% in net income and a similar drop in reported earnings per share. The company continues to generate healthy operating cash flow (operating cash flow per share of $5.03) and free cash flow per share of $3.74, supporting a payout ratio of 36.3% and a modest dividend yield (~0.42%). Liquidity remains adequate (current ratio ~1.13; quick ratio ~1.04) with a lean but manageable leverage profile (debt ratio ~0.39; interest coverage ~5.6x).
- Revenue: $2.816B, YoY +13.18%, QoQ +1.99%
- Gross Profit: $0.949B, Margin 33.70%, YoY +17.02%, QoQ +0.53%
- Operating Income: $0.386B, Margin 13.70%, YoY +16.97%, QoQ -9.18%
- Net Income: $0.245B, Margin 8.70%, YoY +8.41%, QoQ -12.81%
- EPS (GAAP): $2.18; Diluted: $2.16; YoY +8.46%, QoQ -13.15%
- EBITDA: $0.386B, EBITDA Margin ~13.7%
- Cash Flow: Operating cash flow per share $5.03; Free cash flow per share $3.74; Cash per share $3.86; Payout ratio 36.3%
- Liquidity: Current ratio 1.128; Quick ratio 1.041; Cash ratio 0.202; CCC = -14.74 days
- Leverage: Debt ratio 0.394; Interest coverage 5.59x; Long-term debt to capitalization 41.6%; Total debt to capitalization 46.8%
- Valuation signals: P/E ~21.8x; P/B ~2.94x; P/S ~7.58x; EV/EBITDA multiple ~49.9x; Dividend yield ~0.42%
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.82B
13.18%
1.99%
Gross Profit
949.00M
17.02%
0.53%
Operating Income
386.00M
16.97%
-9.18%
Net Income
245.00M
8.41%
-12.81%
EPS
2.18
8.46%
-13.15%
Key Financial Ratios
currentRatio
1.13
grossProfitMargin
33.7%
operatingProfitMargin
13.7%
netProfitMargin
8.7%
returnOnAssets
1.51%
returnOnEquity
3.38%
debtEquityRatio
0.88
operatingCashFlowPerShare
$5.03
freeCashFlowPerShare
$3.74
dividendPayoutRatio
36.3%
priceToBookRatio
2.94
priceEarningsRatio
21.78
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data are provided in the dataset. Consequently, there are no management quotes or theme-based highlights to append. Management commentary, if available, should be incorporated to enrich the forward-looking sections.
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Forward Guidance
No explicit forward-looking guidance appears in the provided data for QQ3 2025. As a result, the forward guidance section relies on qualitative industry dynamics and the company’s reported trajectory. Investors should monitor: (a) payer mix and reimbursement policy developments (Medicare/Commercial), (b) utilization trends for routine vs. advanced testing, (c) cost discipline and SG&A optimization to sustain mid-teens revenue growth without sacrificing profitability, (d) potential expansion of Quest’s digital/Quanum platform and international/tertiary services, and (e) capital deployment signals (capital expenditures, share repurchase, or incremental dividends). Given the QoQ decline in net income despite YoY revenue growth, the achievability of any stated targets would hinge on stabilizing operating expense growth and maintaining the favorable tax treatment that contributed to the current quarter’s net income. Key factors to monitor: reimbursement environment, labor/operating costs, and the pace of digital transformation adoption across payer networks and clinics.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0KSX.L Focus
33.70%
13.70%
3.38%
21.78%
0JSY.L
26.90%
6.50%
1.78%
33.42%
0J5Q.L
56.30%
24.90%
4.02%
18.71%
0LWG.L
29.70%
5.35%
0.28%
220.56%
0IR9.L
82.50%
31.20%
59.50%
27.38%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The QQ3 2025 results demonstrate a healthy top-line trajectory (YoY revenue +13.2%) and solid cash generation, validating Quest Diagnostics’ position as a leading diagnostic services provider. However, the QoQ compression in net income and a relatively modest operating margin signal that cost discipline and payer dynamics will be key drivers of near-term profitability. In a competitive landscape, Quest’s ability to convert higher volumes and favorable mix into sustained margin expansion will be critical. The absence of explicit forward guidance in the dataset suggests a cautious stance; nonetheless, the company’s strong FCF, stable liquidity, and disciplined capital allocation (payout ratio ~36%) support a constructive long-term view, provided management executes on cost controls and leverages digital platforms to improve efficiency and cross-sell services. Near-term investor focus should be on payer policy developments, headcount and SG&A management, and the pace of digital-health initiatives that could bolster operating leverage. Overall, the investment thesis remains cautiously constructive with upside potential if the company sustains revenue growth while steadily improving operating efficiency and free cash flow conversion.
Key Investment Factors
Growth Potential
- Scale advantages in US diagnostic testing network; potential upside from broadened payer mix and higher-margin advanced clinical testing
- Expansion of Quanum and other IT-enabled services to improve uptake and data-driven care pathways
- International/differentiated service lines (e.g., AmeriPath, Dermpath, ExamOne) enabling portfolio diversification
Profitability Risk
- Reimbursement pressure and price competition in the US diagnostic market
- Volatility in volume growth tied to patient visits and insurer reimbursement policies
- Labor cost pressures and supply chain dynamics impacting operating expenses
- Regulatory risk and data/privacy requirements across jurisdictions
Financial Position
- Solid free cash flow generation (FCF per share: 3.74) supports prudence in capital allocation
- Moderate liquidity (cash ratio 0.202) with a current ratio ~1.13; debt levels remain manageable (debt to capitalization 46.8%)
- Payout ratio ~36.3% and dividend yield ~0.42% provide a modest return with room for growth if cash flows remain resilient
SWOT Analysis
Strengths
Large, diversified diagnostic testing network with national scale in the US
Strong cash generation (FCF per share $3.74) and robust operating cash flow per share ($5.03)
Moderate liquidity and a manageable leverage profile supports ongoing capital allocation
Established brands and service breadth (routine, nonroutine, advanced clinical testing, pathology, and Quanum IT solutions)
Weaknesses
Reliance on the US market exposes Quest to payer dynamics and regulatory risk
Margin pressure from operating expenses and potential pricing pressure in a competitive diagnostics landscape
QoQ decline in net income despite YoY revenue growth highlights sensitivity to cost control and tax positioning
Opportunities
Growth in demand for diagnostic testing with aging populations and chronic disease management
Expansion and monetization of digital platforms (Quanum) to improve patient access and data analytics
Potential international expansion and expansion of high-margin specialty testing services
Threats
Regulatory changes and reimbursement policy shifts (Medicare/Commercial) impacting pricing and utilization
Intense competition from Labcorp and other regional providers
Macroeconomic pressures affecting healthcare spend and patient volumes