Financial Trends -- 6/10
Mixed but improving. Revenue growing low-to-mid single digit. FCF inflected +49.5% to $1,359M
in FY25 (OCF $1,886M minus capex $527M). Margins modestly expanding. Share count stable/slightly
declining. The Q1'26 quarterly FCF dip (-16.8%) is seasonal, not structural. No penalty modifiers
apply. Revenue growth is slow but steady for a lab-services franchise. Advanced diagnostics (38%
of DIS mix) growing faster than routine testing. Project Nova driving margin improvement.
Medicare-regulated routine testing (~54% of mix) is a pricing constraint.
Weight: 25%
Revenue Growing
Low-Mid SD
Steady
FY25 FCF
$1,359M
+49.5% YoY | Inflecting strongly
Margins Expanding
Modestly
Improving | Positive
Share Count
Stable
Slightly declining | No dilution
Annual Financial Summary ($M, FY ends December)
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| Net Revenue | $9,437M | $10,788M | $9,883M | $9,252M | $9,872M | $11,035M |
| Rev YoY | — | +14.3% | -8.4% | -6.4% | +6.7% | +11.8% |
| Organic Rev Growth | — | — | — | — | ~3.0% | 5.3% |
| Test Requisitions (M) | 187M | 218M | 208M | 206M | 217M | 244M |
| Req YoY | — | +16.6% | -4.6% | -1.0% | +5.3% | +12.4% |
| Rev/Req YoY | +16.2% | -1.6% | -4.5% | -5.9% | +1.3% | +0.1% |
| Cost of Services | $5,804M | $6,579M | $6,450M | $6,199M | $6,628M | $7,370M |
| SG&A | $1,550M | $1,727M | $1,874M | $1,642M | $1,770M | $1,967M |
| GAAP Op Income | $1,971M | $2,381M | $1,428M | $1,262M | $1,346M | $1,556M |
| GAAP Op Margin | 20.9% | 22.1% | 14.5% | 13.6% | 13.6% | 14.1% |
| Adj Op Margin | 23.4% | 23.8% | 17.6% | 15.8% | 15.6% | 15.9% |
| Adj Diluted EPS | $11.18 | $14.24 | $9.95 | $8.71 | $8.93 | $9.85 |
| Adj EPS YoY | — | +27.4% | -30.1% | -12.5% | +2.5% | +10.3% |
| Net Income | $1,431M | $1,995M | $946M | $854M | $871M | $992M |
| Cash From Ops | $2,005M | $2,233M | $1,718M | $1,272M | $1,334M | $1,886M |
| CapEx | ($418M) | ($403M) | ($404M) | ($408M) | ($425M) | ($527M) |
| Free Cash Flow | $1,587M | $1,830M | $1,314M | $864M | $909M | $1,359M |
| FCF YoY | — | +15.3% | -28.2% | -34.2% | +5.2% | +49.5% |
| Diluted Shares (M) | 136M | 128M | 118M | 113M | 113M | 113M |
Note: FY2020-2021 revenues include material COVID testing contribution. LifeLabs acquisition
closed mid-2024. FCF = OCF minus CapEx. Advanced diagnostics represent ~38% of DIS revenue mix
and are growing faster than routine testing. Medicare-regulated routine testing (~54% of mix) is
a structural pricing constraint.
Revenue growth is slow but steady for a lab-services franchise.
Organic growth of 5.3% in FY25 is solid relative to the 1-2% historical lab industry norm, but
headline +11.8% overstates core momentum (~60% was inorganic from LifeLabs and outreach
acquisitions). Requisitions surged +12.4% to
244M, driven by health plan access
expansion, advanced diagnostics, and consumer-initiated testing.
Margin Trajectory
Quarterly Trends (Q1 2023 through Q4 2025)
| Metric | Q1 23 | Q2 23 | Q3 23 | Q4 23 | Q1 24 | Q2 24 | Q3 24 | Q4 24 | Q1 25 | Q2 25 | Q3 25 | Q4 25 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | $2,331M | $2,338M | $2,295M | $2,288M | $2,366M | $2,397M | $2,488M | $2,621M | $2,652M | $2,761M | $2,816M | $2,806M |
| Rev YoY | — | — | — | — | +1.5% | +2.5% | +8.4% | +14.6% | +12.1% | +15.2% | +13.2% | +7.1% |
| Organic Rev Growth | — | — | — | — | — | — | 4.2% | 5.0% | 2.5% | 5.2% | 6.8% | 6.4% |
| Rev/Req YoY | -7.7% | -4.9% | -7.2% | -3.5% | +0.1% | +1.6% | +3.3% | +0.2% | +0.3% | -0.4% | +0.8% | -0.1% |
| GAAP Op Margin | 13.1% | 14.9% | 14.9% | 11.7% | 12.7% | 14.8% | 13.3% | 13.8% | 13.0% | 15.9% | 13.7% | 13.8% |
| Adj Op Margin | 15.0% | 16.7% | 16.6% | 14.8% | 14.8% | 16.6% | 15.5% | 15.6% | 15.3% | 16.9% | 16.3% | 15.3% |
| Adj Diluted EPS | $2.04 | $2.30 | $2.22 | $2.15 | $2.04 | $2.35 | $2.30 | $2.23 | $2.21 | $2.62 | $2.60 | $2.42 |
| Adj EPS YoY | — | — | — | — | 0.0% | +2.2% | +3.6% | +3.7% | +8.3% | +11.5% | +13.0% | +8.5% |
Q1'26 quarterly FCF dip (-16.8%) is seasonal, not structural.
Q1 is historically the weakest cash flow quarter for DGX due to annual incentive payouts and
working capital seasonality. The full-year trajectory remains intact. Organic revenue growth
accelerated from 2.5% in Q1 to 5-7% by H2 2025, showing steady improvement in the base business.
Free Cash Flow Breakdown ($M, Annual)
Score Rationale
Score of 6/10 reflects a lab-services franchise with slow but steady revenue growth, a strong FCF inflection, and modestly expanding margins -- offset by the inherent growth ceiling of a Medicare-regulated testing business. No penalty modifiers apply.
What supports the 6:
- FCF inflected +49.5% to $1,359M in FY25, the strongest cash generation since FY22
- Margins modestly expanding; adj op margin up +30 bps to 15.9%
- Organic revenue growth of 5.3% is solid relative to 1-2% lab industry norm
- Share count stable/slightly declining (136M in 2020 to 113M by 2023, now flat)
- Advanced diagnostics (38% of DIS mix) growing faster than routine testing
- Project Nova driving structural margin improvement
What keeps it from 7+:
- Revenue growth is low-to-mid single digit -- steady but not exceptional
- Medicare-regulated routine testing (~54% of mix) is a permanent pricing constraint
- Multi-year margin compression from COVID peak (23.8% to 15.9%) still not recovered
- Rev/req essentially flat as new partnerships mix down the average
- Headline +11.8% revenue growth heavily M&A-driven; organic is the real story
Data sourced from Daloopa (company_id: 542) and Quest Diagnostics earnings releases (FY2020 through Q4 2025). All financials in USD. FYE December 31.