Is DGX Stock Worth Buying After Its Strong 2026 Earnings Momentum?

DGX Delivers a Strong Second-Quarter Beat

Quest Diagnostics reported second-quarter 2026 adjusted earnings of $3.12 per share, up 19.1% year over year. The result surpassed the Zacks Consensus Estimate by 11%, extending a period of positive earnings momentum.

Revenues rose 10.2% year over year to $3.04 billion and beat the consensus mark by 2.1%. Growth was supported by a 13.1% increase in requisition volume, with Diagnostic Information Services benefiting from physician, hospital and consumer channels.

Physician channel revenues increased in the high single-digit range, helped by new customer wins, higher business with existing customers and expanded health plan access. Hospital revenues grew at a double-digit rate, while QuestHealth.com continued to see demand for wellness panels and newer services such as thyroid testing.

Quest Diagnostics Raises Its 2026 Outlook

Quest Diagnostics now expects 2026 revenues of $11.95 billion to $12.05 billion, up from its prior range of $11.78 billion to $11.90 billion. The revised outlook implies revenue growth of 8.3-9.2%.

Adjusted earnings are projected at $11.05 to $11.25 per share, compared with the previous range of $10.63 to $10.83. The Zacks Consensus Estimate for 2026 earnings has also moved higher, with the current-year earnings estimate up 4.1% over the past four weeks.

The higher outlook reflects stronger testing demand and better expected earnings conversion. It also supports the case that Quest’s base business, acquisitions and advanced diagnostics portfolio are contributing to near-term growth.

DGX Valuation Leaves Less Room for Error

Valuation is the main counterweight after the share-price run. DGX trades at 20.34X forward 12-month earnings, above its five-year median of 16.16X and at the high end of its five-year range of 11.34X to 20.65X.

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Shares recently traded at $235.22, compared with a $252 price target. That target still points to positive potential, but the upside is moderate after gains of 24.4% in the past three months and 39.4% over the past year.

The stock also trades slightly above the S&P 500 on a forward earnings basis. Investors are paying for improved visibility, but the valuation leaves less cushion if volumes slow, costs rise or margin recovery takes longer.

Quest Diagnostics Faces Debt and Margin Risks

Quest Diagnostics ended the second quarter with $626 million in cash and cash equivalents, while long-term debt stood at $5.63 billion. Elevated debt could limit flexibility as the company invests in acquisitions, automation and Project Nova.

Margin trends also require monitoring. Adjusted operating margin declined 40 basis points to 16.5% in the second quarter, as higher service costs, Project Nova spending, supplemental deferred compensation and the lower-margin Corewell and Fresenius mix weighed on profitability.

Reimbursement remains another pressure point. Management continues to assume a 30-basis-point 2026 revenue impact tied to the expiration of enhanced Affordable Care Act exchange subsidies, with a larger second-half effect still possible.

Labcorp Holdings Inc. LH remains a relevant peer because it operates in the same diagnostics and laboratory services market where price, access, turnaround time and service quality matter. DaVita Inc. DVA adds context for kidney-care exposure, an area where Quest has broadened capabilities through the Fresenius Medical Care collaboration.

Based on short-term price targets offered by 16 analysts, the average price target for Quest Diagnostics comes to $242.75, representing an increase of 3.2% from the last closing price. 

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DGX Scores Favor Near-Term Selectivity

DGX still has a constructive near-term profile. The stock currently carries a Zacks Rank #2 (Buy), which reflects favorable earnings estimate revision trends over the one-to-three-month horizon.

The Style Scores add nuance. DGX has a Momentum Score of A and a VGM Score of A, while its Value Score and Growth Score are both B. That mix points to solid overall characteristics, with momentum currently standing out more than the valuation margin of safety.

For investors, the stock remains worth watching, but selectivity is warranted. Earnings momentum, higher guidance and positive estimate revisions support the near-term case, while valuation, leverage and margin pressure argue against chasing the stock without regard to entry point.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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