Quest raises profit forecast as COVID-19 tests demand to jump

(Reuters) - Quest Diagnostics Inc DGX.N raised its full-year earnings expectations on Thursday after a strong quarterly beat and forecast robust demand for COVID-19 tests during the fall season and into 2021.

Rival Abbott Laboratories ABT.N on Wednesday also projected demand for COVID-19 tests to rise next year, even if a vaccine is developed, and lifted its 2020 profit forecast.

Quest said it performed 93,000 molecular tests and 11,000 serology tests per day for COVID-19 in the quarter, with an average turnaround time of less than two days.

“We are increasing capacity and that should get us eventually coming out of this year at 250,000 (COVID-19 tests) per day,” Chief Executive Officer Stephen Rusckowski said on a call with analysts. The company currently has the capacity to perform 200,000 tests per day.

Quest is reviewing the new reimbursement policy for COVID-19 molecular testing from the Centers for Medicare & Medicaid Services.

The agency earlier this month said Medicare will pay $100 only to laboratories that complete high throughput COVID-19 diagnostic tests within two calendar days of the specimen being collected, starting Jan. 1.

“We need to understand exactly when the clock starts on turnaround time. We expect to be in very good shape around meeting the criteria,” Chief Financial Officer Mark Guinan said.

The company expects 2020 adjusted earnings per share to be between $9 and $10, up from a prior forecast of $7.50 to $9.

Quest said there was an uptick in base testing volumes, which excludes COVID-19 testing, in the United States in the third quarter as healthcare centres began to operate at pre-pandemic levels.

The company said it would return the $138 million it had received under the federal government’s CARES Act earlier in the year to help weather the health crisis.

Excluding items, Quest earned $4.31 per share, beating analysts’ estimates of $3.73.

Revenue surged 42.4% to $2.79 billion.

Reporting By Mrinalika Roy in Bengaluru; Editing by Shailesh Kuber and Sriraj Kalluvila