Goldman Sachs is adding Quest Diagnostics (NYSE:DGX) to Conviction Sell list while lowering their tgt to $38 from $45.
Downside to DGX on valuation, volumes and health reform
Following relative outperformance since 4Q08, they expect Quest shares will underperform their coverage, with valuation at risk of market-relative convergence to other healthcare services names. DGX’s >10% premium to peer LH (7.1x vs 6.2x EV/EBITDA) is not justified given less balance sheet flexibility; in addition, they’ve highlighted downside risk to its outlook for 3% revenue growth this year in light of macroeconomic trends.
Finally, the firm highlights potential downside to Medicare lab reimbursement as healthcare reform discussions advance (esp. given emerging pressure in the US Senate for deeper healthcare spending cuts as a partial alternative to tax increases). They see 15% potential downside to their 6 month target of $38.
Notablecalls: The way below market price tgt from Goldman Sachs will probably attract sellers in the stock.
Downside to DGX on valuation, volumes and health reform
Following relative outperformance since 4Q08, they expect Quest shares will underperform their coverage, with valuation at risk of market-relative convergence to other healthcare services names. DGX’s >10% premium to peer LH (7.1x vs 6.2x EV/EBITDA) is not justified given less balance sheet flexibility; in addition, they’ve highlighted downside risk to its outlook for 3% revenue growth this year in light of macroeconomic trends.
Finally, the firm highlights potential downside to Medicare lab reimbursement as healthcare reform discussions advance (esp. given emerging pressure in the US Senate for deeper healthcare spending cuts as a partial alternative to tax increases). They see 15% potential downside to their 6 month target of $38.
Notablecalls: The way below market price tgt from Goldman Sachs will probably attract sellers in the stock.
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