QuidelOrtho Corporation QDEL is well-poised for growth in the coming quarters, courtesy of its strong product portfolio. The optimism, led by a solid preliminary revenue for fourth-quarter 2024, is expected to contribute further. However, risks due to overdependence on diagnostic tests and reimbursement policies persist.

This Zacks Rank #3 (Hold) company has gained 10.8% in the past six months compared with 15.9% growth of the industry. The S&P 500 has witnessed 10.6% growth in the said time frame.

The renowned rapid diagnostic testing solutions provider has a market capitalization of $3.07 billion. QuidelOrtho’s earnings yield of 5.3% compares favorably with the industry’s 0.4%. The company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in one, the average surprise being 50.28%.

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Factors Favoring QDEL’s Growth

Robust Product Portfolio: QuidelOrtho sells diagnostic testing solutions to both professional users (physicians, hospitals) and individual OTC users. Its product portfolio includes the Sofia and Sofia 2 Analyzers, QuickVue, InflammaDry, and AdenoPlus. The company’s Savanna instrument continues to provide competitive advantages in the Molecular Point-of-Care market, with a successful U.S. launch expected to drive revenue and margin growth. Building on U.S. approvals for the Savanna instrument and HSV panel, QuidelOrtho plans to begin clinical trials for its respiratory panel in 2025, aiming to launch both the Respiratory and STI panels in the same year.

In April 2024, QuidelOrtho expanded its U.S. Vitros XT and 5600 Integrated Systems and Vitros 4600 Chemistry System with the ARK Fentanyl II Assay. This addition addresses the critical demand for opioid testing, strengthening the company’s Labs business unit across the United States, particularly in hospitals and emergency rooms. The Fentanyl assay complements the company’s broader strategy to deliver innovative solutions that meet emerging healthcare needs.

Potential in Diagnostic Business: QuidelOrtho’s focus on advancing its diagnostics business to improve human health has enabled the company to target market segments that represent significant total market opportunities. The company believes it can be successful in doing so by applying its expertise and know-how to develop differentiated technologies and products.

The company’s diagnostic testing solutions are designed to provide specialized results that serve a broad range of customers by addressing the market requirements of ease of use, reduced cost, increased test accuracy and reduced time to result. The clinical diagnostics market was valued at approximately $84.2 billion in 2024 and is anticipated to reach $109.2 billion by 2029 at a CAGR of 5.5%, per a report by Mordor Intelligence.

Solid Preliminary Q4 Results: QuidelOrtho recently announced preliminary revenues for fourth-quarter 2024. Per the preliminary report, QDEL expects total reported revenues for the fourth quarter of 2024 in the range of approximately $702 million-$707 million, which aligns with its previously announced 2024 financial guidance. Labs revenue also aligns with expectations. Non-respiratory revenues are expected to be in the range of $561 million-$563 million, and Respiratory revenues are anticipated to be in the range of $141 million-$143 million.

The Zacks Consensus Estimate of $699.9 million lies below the preliminary figure. The preliminary revenues suggest growth of 9.2% sequentially and a decline of 5.1% year over year at the midpoint of the range.

QuidelOrtho has shown strong growth in recent quarters, maintaining resilience in both respiratory and non-respiratory sectors. The company’s fourth-quarter performance is expected to continue this trend, with preliminary revenue projections indicating stability and alignment with previous expectations. Given this momentum, the company is well-positioned to sustain its growth trajectory as it closes in 2024.

Factors That May Offset the Gains for QDEL

Third-Party Reimbursement Policies: QuidelOrtho's Point-of-Care (POC) products are primarily used by physicians and other healthcare providers. In the United States, these providers, including hospitals and physicians, typically depend on third-party payers, such as private health insurance, Medicare, and Medicaid, to reimburse all or part of the cost of diagnostic procedures. The success of QuidelOrtho's products could be impacted if healthcare providers do not receive sufficient reimbursement from third-party payers for the costs associated with the company's products.

Overdependence on Diagnostic Tests:  A substantial portion of QuidelOrtho's total revenues is derived from a limited number of product families, with respiratory products being a key contributor. In September 2024 and September 2023, respiratory products accounted for approximately 23% and 25% of total revenues, respectively, driven largely by COVID-19 product sales. The year-over-year decline was attributed to a milder respiratory season in 2023, resulting in a roughly $1 billion decrease in COVID-19-related testing revenues.

Estimate Trend

QuidelOrtho is witnessing a stable estimate revision trend for 2024. In the past 30 days, the Zacks Consensus Estimate for its earnings has remained stable at $1.77 per share.

The Zacks Consensus Estimate for the company’s fourth-quarter 2024 revenues is pegged at $702.3 million, indicating a 5.4% decline from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Cardinal Health, Inc. CAH, ResMed Inc. RMD and DaVita Inc. DVA.

Cardinal Health, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 10.5%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 11.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cardinal Health’s shares have gained 21.7% compared with the industry’s 6.1% growth in the past year.

ResMed, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.8%. RMD’s earnings surpassed estimates in each of the trailing four quarters, with the average being 6.4%.

ResMed has gained 32.4% compared with the industry’s 16.5% growth in the past year.

DaVita, sporting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 18.3%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with the average surprise being 10.6%.

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