In the fourth quarter of last year, income from continuing operations was actually up 2% year over year, thanks to Quest's acquisition of AmeriPath and a new agreement with Aetna
Quest's other problem is the uncertainty surrounding the government investigation into its former test manufacturing unit, NID. The company is hoping to reach a settlement, and it increased its reserves to be used for legal fees and a possible settlement by $190 million. Still, Quest said it's "fully prepared to litigate this matter" if it can't reach a compromise with the government.
Longer-term, things look better for the Inside Value pick. If it can move its operating margin from the 17% expected this year toward its long-term goal of 20%, Quest should make out pretty well in the health-care diagnostics duopoly. The population isn't getting any younger, you know.
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United Health and Lab Corp. are picks of the Stock Advisor newsletter.