On January 12, 2022 Quest Diagnostics Incorporated (NYSE: DGX), the world’s leading provider of diagnostic information services, reported that preliminary financial results for the fourth quarter and full year 2021 (Press release, Quest Diagnostics, JAN 12, 2022, View Source [SID1234598630]). Fourth quarter 2021 results reflect higher than expected demand for COVID-19 testing services, while base testing volumes remained steady and consistent with the company’s latest outlook shared on October 21, 2021. The company is scheduled to present virtually today at the 40th Annual J.P. Morgan Healthcare Conference.

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Preliminary Fourth Quarter 2021 Results

The company expects fourth quarter 2021 reported revenue to be approximately $2.74 billion, a decrease of 9% compared to $3.00 billion in 2020.

Total volume, measured by the number of requisitions, increased approximately 1.3% in the fourth quarter of 2021 versus the prior year. Total base testing volumes (excluding COVID-19 testing) increased approximately 10% compared to the company’s fourth quarter of 2019, which represents a pre-pandemic baseline. COVID-19 testing volumes in the fourth quarter, which included approximately 7.9 million molecular tests and 0.7 million serology tests, declined compared to the prior year.

The company expects reported diluted earnings per share ("EPS") for the fourth quarter 2021 to be $3.12 compared to $4.21 in 2020. Adjusted diluted EPS for the fourth quarter 2021 is expected to be $3.33, compared to $4.48 in the fourth quarter of 2020.

Preliminary Full Year 2021 Results

The company expects full year 2021 reported revenue to be approximately $10.79 billion, an increase of 14% compared to $9.44 billion in 2020.

The company expects reported diluted EPS for the full year 2021 to be $15.55 compared to $10.47 in 2020. Adjusted diluted EPS for the full year 2021 is expected to be $14.24, compared to $11.18 in 2020.

The full year 2021 results are expected to exceed the company’s latest outlook shared on October 21, 2021. The full year performance reflects an increase in COVID-19 testing services and a steady recovery in the company’s base testing volumes throughout 2021.

Actual results for the fourth quarter and full year ended December 31, 2021 may differ from those indicated as a result of financial closing procedures, final adjustments and other developments that may arise between the date of this announcement and when results for the fourth quarter and full year ended December 31, 2021 are finalized, as well as other risks and uncertainties.

Updated Expectations for 2022

At its Investor Day in March 2021, the company shared a baseline view for 2022, including revenue of at least $8.5 billion and adjusted diluted EPS near the upper end of $7.40 to $8.00. The company reaffirmed this view on its third quarter 2021 earnings call on October 21, 2021.

The company now believes that it will exceed adjusted diluted EPS of $8.00 in 2022, driven by: higher than anticipated current demand for COVID-19 testing services; expected growth in the base business; and the recently announced one-year delay of PAMA cuts; partially offset by inflation, higher labor costs, and investments to accelerate growth. The company will provide a detailed 2022 outlook when it reports fourth quarter and full year 2021 results on Thursday, February 3, 2022.

Note on Non-GAAP Financial Measures

As used in this press release the term "reported" refers to measures under accounting principles generally accepted in the United States ("GAAP"). The term "adjusted" refers to non-GAAP operating performance measures that exclude special items such as restructuring and integration charges, certain financial impacts resulting from the COVID-19 pandemic, amortization expense, excess tax benefits ("ETB") associated with stock-based compensation, a gain on remeasurement of an equity interest, a gain on sale of an ownership interest in a joint venture, gains associated with changes in the carrying value of our strategic investments, costs associated with donations, contributions, and other financial support through Quest for Health Equity, the company’s initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities, and other items.

Non-GAAP adjusted measures are presented because management believes those measures are useful adjuncts to GAAP results. Non-GAAP adjusted measures should not be considered as an alternative to the corresponding measures determined under GAAP. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe that these non-GAAP measures are useful to investors and analysts to evaluate our performance period over period and relative to competitors, as well as to analyze the underlying trends in our business and to assess our performance. The additional tables attached below include reconciliations of non-GAAP adjusted measures to GAAP measures.

We are unable to reconcile our preliminary 2022 outlook for adjusted diluted EPS at this time because we cannot, without unreasonable efforts, estimate the impact of the adjustments to our diluted GAAP EPS to provide a reconciliation to adjusted diluted EPS.