* Expects 3 pct fall in reimbursement revenue in 2013
* Forecast 2013 profit at $4.35-$4.55/share vs est $4.81
* Expects full-year revenue flat to up 1 pct
* Fourth-quarter adj earnings $1.01/share vs est $1.02
* Shares fall as much as 7 percent
Jan 23 (Reuters) – Laboratory tests provider Quest
Diagnostics Inc’s fourth-quarter profit missed analysts’
recently cut estimates, and the company forecast 2013 results
below market expectations, citing pricing and reimbursement
pressures.
Quest, the No. 1 U.S. laboratory testing company, and its
peer Laboratory Corp of America Holdings face falling
test volumes as hospitals buy physician groups, which order
tests to be conducted inhouse.
Shares of Quest, which conducts tests under brands such as
AmeriPath and Athena Diagnostics, were down 5 percent at $58.54
in late-morning trading on the New York Stock Exchange.
William Blair & Co analyst Amanda Murphy said Quest results
reflected a difficult reimbursement environment, from both a
public and private payer standpoint.
Pricing issues, along with cuts in Medicare and pathology
service reimbursement, will result in a 3 percent fall in
reimbursement revenue in 2013, Quest Chief Executive Steve
Rusckowski said on a conference call.
“(Pathology) is a sizeable piece of our business and some of
those (services) are facing reimbursement cuts in excess of 50
percent,” Quest Chief Financial Officer Robert Hagemann said.
The company said it expects reimbursements to reduce by an
average of 1 percent to 2 percent through 2015.
“We have disclosed that our Medicare revenue is in the range
of a billion dollars or so, so a 5 percent cut on that is $50
million that drops right down to the bottomline,” Hagemann said.
Quest cut its 2012 earnings forecast last week, citing
damage from superstorm Sandy and charges related to the sale of
two businesses, HemoCue and OralDNA.
It had also said it will restate its 2011 and 2012 results
to remove the impact of HemoCue and OralDNA businesses from
continuing operations.
“During the fourth quarter, continued strong progress in our
Invigorate cost-reduction initiative enabled us to mitigate some
of the impact of revenue softness, which was exacerbated by the
impact of Hurricane Sandy,” CEO Rusckowski said in a statement.
The Madison, New Jersey-based company expects its cost
initiatives to help it save up to $500 million by 2014 end.
“We believe the challenging testing environment continues to
weigh on results as (Quest’s) cost-cutting initiatives were not
enough to offset margin contraction in fourth quarter as a
result of weak testing growth,” Piper Jaffray analyst Kevin
Ellich said in a note.
FORECASTS WEAK 2013
Quest forecast a profit of $4.35 to $4.55 per share for
2013. It said it expected revenue to stay flat or grow up to 1
percent – implying revenue of about $7.46 billion at the top end
of the range.
Analysts on average were expecting a profit of $4.81 per
share on revenue of $7.53 billion, according to Thomson Reuters
I/B/E/S.
Excluding items, the company earned $1.01 per share from
continuing operations in the fourth quarter, slightly below
expectations of $1.02.
Revenue fell 4 percent to $1.8 billion, in line with market
estimates.
