Quest Diagnostics (NYSE:DGX) stock has held up better than many so far in 2020. Although the diagnostics-information services provider's shares sank as much as 31% in early April, the stock rebounded strongly in recent weeks.
Whether or not that rebound would continue was put to the test when Quest announced its first-quarter results before the market opened on Wednesday. Here are the highlights from the company's Q1 update.
By the numbers
Quest Diagnostics reported first-quarter revenue of $1.82 billion. While this result was 3.7% lower than the company's revenue in the prior-year period, it topped the consensus Wall Street Q1 revenue estimate of $1.75 billion.
The diagnostics provider announced net income in Q1 of $99 million, or $0.73 per share, based on generally accepted accounting principles (GAAP). This reflected a decrease from GAAP net income of $164 million, or $1.20 per share, recorded in the same quarter last year.
Quest posted adjusted earnings of $0.94 per share in the first quarter, a 32% year-over-year decline. However, it still handily beat the average analysts' estimate of Q1 adjusted earnings of $0.89 per share.
The company ended the first quarter with cash on hand totaling $342 million. Quest also had another $1.3 billion available through existing credit facilities.
Behind the numbers
There were two stories in Quest's Q1 update. The company performed very well in the first couple of months during the quarter. Then the bottom dropped out with the COVID-19 outbreak.
Quest CEO Steve Rusckowski said that in March, the company "experienced a material decline in testing volumes due to the COVID-19 pandemic." He added that volumes plunged more than 40% during the last two weeks of March, even with a boost from COVID-19 testing.
This significant drop in volume caused Quest to be forced to take some drastic actions. The company cut the pay for its executive team and board of directors. Quest suspended some benefits, including its 401(k) match. It reduced hours for some employees and furloughed some employees who expressed interest in the option. Quest referred to all of these measures as temporary ones.
The company withdrew its previous full-year 2020 guidance. Quest stated that it is "unable to accurately forecast the near term impact of the pandemic on its business given the rapidly evolving uncertainties and likely outcomes but intends to provide an updated outlook at an appropriate time."
Quest also said that the coronavirus crisis will probably impact its ability to comply with some financial covenants by late second quarter. The company has already been in discussions with its lead lender about amending the financial covenants of its unsecured revolving credit facility. Quest thinks that this amendment would enable it to comply with the covenants for the rest of this year. The company expressed optimism that the financial covenants would be amended in the second quarter.
On a more positive note, Quest's board isn't making any changes to the dividend program right now. Rusckowski also looked to a brighter future once the current crisis is over. He said: "Eventually, the healthcare system will start to return to normal. When that happens, Quest will emerge from the crisis stronger with significant opportunities in front of us."