Healthcare diagnostics company Quest Diagnostics (NYSE: DGX) reported Q1 CY2026 results beating Wall Street’s revenue expectations, with sales up 9.2% year on year to $2.90 billion. The company’s full-year revenue guidance of $11.84 billion at the midpoint came in 0.7% above analysts’ estimates. Its non-GAAP profit of $2.50 per share was 5.6% above analysts’ consensus estimates.

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"Our more than 9% revenue growth, almost entirely organic, and approximately 13% adjusted diluted earnings per share growth reflect our team's disciplined execution of our strategy to deliver innovative diagnostic solutions for our customers' evolving needs," said Jim Davis, Chairman, CEO and President.

Company Overview

Processing approximately one-third of the adult U.S. population's lab tests annually, Quest Diagnostics (NYSE: DGX) provides laboratory testing and diagnostic information services to patients, physicians, hospitals, and other healthcare providers across the United States.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Quest grew its sales at a tepid 1.8% compounded annual growth rate. This fell short of our benchmarks and is a poor baseline for our analysis.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Quest’s annualized revenue growth of 10.2% over the last two years is above its five-year trend, suggesting some bright spots.

We can dig further into the company’s revenue dynamics by analyzing its number of requisition volumes. Over the last two years, Quest’s requisition volumes averaged 10.1% year-on-year growth. Because this number is in line with its revenue growth, we can see the company kept its prices fairly consistent.

This quarter, Quest reported year-on-year revenue growth of 9.2%, and its $2.90 billion of revenue exceeded Wall Street’s estimates by 2.7%.

Looking ahead, sell-side analysts expect revenue to grow 5.4% over the next 12 months, a deceleration versus the last two years. We still think its growth trajectory is satisfactory given its scale and indicates the market sees success for its products and services.

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Adjusted Operating Margin

Quest has managed its cost base well over the last five years. It demonstrated solid profitability for a healthcare business, producing an average adjusted operating margin of 17.2%.

Looking at the trend in its profitability, Quest’s adjusted operating margin decreased by 6.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q1, Quest generated an adjusted operating margin profit margin of 14.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Quest, its EPS declined by 6.2% annually over the last five years while its revenue grew by 1.8%. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of Quest’s earnings can give us a better understanding of its performance. As we mentioned earlier, Quest’s adjusted operating margin was flat this quarter but declined by 6.9 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Quest reported adjusted EPS of $2.50, up from $2.21 in the same quarter last year. This print beat analysts’ estimates by 5.6%. Over the next 12 months, Wall Street expects Quest’s full-year EPS of $10.14 to grow 6.7%.

Key Takeaways from Quest’s Q1 Results

We enjoyed seeing Quest beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Looking ahead, full-year guidance for revenue and EPS were both raised. Overall, this print was quite solid without any major blemishes. The stock traded up 3.4% to $203.00 immediately after reporting.

Sure, Quest had a solid quarter, but if we look at the bigger picture, is this stock a buy? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).