Short Interest Ratio: 14.31

did good for me

Cramer's healthcare favorites include: MedcoHealth Solutions (MHS) for cost containment, Quest Diagnostics (DGX) for diagnostics, and Allscripts (MDRX) for electronic record keeping.

16.2

20.9

20.9

Next on the list is Quest Diagnostics. The global leader in diagnostic testing announced that its board approved a buyback plan worth $500 million. During 2008 the company spent about $254 million repurchasing 5.5 million of its common shares, which exhausted its previous buyback plan. As of December 31, 2008, the company had about 190 million common shares outstanding.

Credit Suisse analysts estimate that every $100 million in stock buybacks equates to about 2 cents in EPS growth.
"This repurchase program demonstrates confidence in our performance and commitment to increasing shareholder value," said Surya N. Mohapatra, Ph.D., Chairman and CEO of Quest Diagnostics.

In addition to the new buyback, Quest also reported stellar fourth quarter results with total revenues topping $1.8 billion. Fourth quarter net income came in at $169.8 million, or 87 cents a share, compared to a net loss of $5.3 million or 3 cents a share in the year-ago period. Another highlight from the quarter was that cash flow increased to $363 million.

"We delivered another quarter of solid earnings growth, completing a year of strong performance. For the full year, earnings per share increased 14%, revenues grew 8% and cash flow exceeded $1 billion. I am very pleased with our achievements," said Surya.

It’s good to see that analysts from Credit Suisse see upside potential in DGX. After the solid earnings report CS reiterated it’s outperform rating and increased their price target to $59 from $56. Ralph Glacobbe from CS commented, “Shares of DGX finished the day up 10% behind a 4Q EPS beat, and 2009 guidance that came in ahead of expectations. Despite slowing top-line trends, 4Q showed impressive margin performance, which is expected to continue in 2009.”

The Madison, N.J.-based Medical lab operator expects 2009 EPS in the range of $3.50 to $3.70 a share; the midpoint equals about 11% growth over 2008. Quest expects 3% revenue growth and EBIT margins to approach 18%.

Another bullish sign is that an astoundingly successful firm like the D. E. Shaw Group owns shares of DGX. Since its organization in 1988, the firm has earned an international reputation for financial innovation and an extraordinarily distinguished staff. The D. E. Shaw group encompasses a number of closely related entities with more than 1,000 employees, approximately $45 billion in aggregate investment capital and offices all over the world. Some of their other top stocks are XOM and OC.

So we have a new buyback, a solid fourth quarter, a buy rating with an enlarged price target, and a top-notch investment firm is betting on the stock. That’s a pretty nice setup for this stock to take off.

10.8

And CNBC’s Mike Huckman thinks the results will have a substantial ripple effect, creating a significant impact on companies like Quest Diagnostics (DGX) that perform the tests to determine cholesterol levels.

From a recent Mad Money show:


"I don't like them as much as Laboratory Corp. of America Holding (LH), which has a lot more momentum. I'd swap out of yours for mine."

Has not been good to me

Slightly down since I bought it. Tiny dividend.

can't break out of current pricing

I work for Quest

TURN AROUND

Quest has a terrible reputation within the industry for bad service

growth