AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · The physical network, extensive connectivity and substantial hospital services support a current scale advantage. Disclosed productivity savings reinforce the inference, but comparative unit costs and market position are absent.
durability · 2/4 · Established infrastructure and hospital relationships support persistence, while competition and possible testing internalization constrain durability. Future technology benefits cannot be counted as achieved.
customer dependency · 2/4 · Electronic health record interfaces and outsourced hospital operations imply workflow integration and some replacement friction. This is indirect evidence; contractual lock-in, switching expense and retention rates are undisclosed.
erosion resilience · 2/4 · Productivity improvements, rising operating income and cash generation show resilience amid cost pressure. Historical reimbursement cuts and competition remain constraints; recent margins do not show uniform improvement.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Medicare laboratory reimbursement was actually reduced during 2018–2020, demonstrating weak pricing control in that channel. Cuts were subsequently delayed through 2026. Current commercial price realization is unavailable, so revenue growth is not interpreted as price growth.
retention · 2/4 · Annual service to approximately half of U.S. hospitals and substantial reference-testing and lab-management business support repeat institutional demand indirectly. They do not demonstrate a cohort retention rate or prove that growth came from retained customers.
margin resilience · 2/4 · Reported operating margin improved from 13.6% in 2024 to 14.1% in 2025, partly aided by a payroll tax credit. First-half 2026 margin was approximately stable year over year, while second-quarter margin declined despite higher operating income. Savings provide support, but these mixed outcomes do not establish broad pricing power.
contractual freedom · 1/4 · Government fee schedules and implemented Medicare cuts demonstrate limited discretion over reimbursement in that channel. Commercial contract-setting freedom is undisclosed; the grade reflects the established constraint rather than assuming uniform terms across payers.
Predictability85
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 50.00
- Revenue growth volatility (pp)
- 8.54
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.86
Financial strength41
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 54.67
- netDebtEbitGrade
- 32.51
- interestCoverageGrade
- 52.14
- currentRatioGrade
- 23.51
- Debt / FCF (x)
- 4.17
- Net debt / operating income (x)
- 3.37
- Current ratio (x)
- 1.04
- cashInterestPaid
- 280.00
- cashInterestCoverage
- 6.74
Capital allocation87
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 12.30
- 3-year average dilution (%)
- -1.45
- 3-year average SBC / revenue (%)
- 0.84
- cashConversionGrade
- 100.00
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · 2025 operating cash flow of $1.886 billion supported capital expenditure, shareholder distributions and net debt repayment following substantial 2024 acquisition spending. First-half 2026 cash generation remained positive, but impairment charges and slower collections temper the assessment. Acquisition returns and repurchase value creation are not established.
incentive alignment · 3/4 · Actual 2025 equity awards included three-year performance shares linked to revenue growth, average ROIC and relative shareholder return, with a completed-cycle payout disclosed. These are implemented arrangements, not proposals. Performance adjustments and missing ownership levels limit conclusions about ultimate alignment.
execution · 3/4 · Reported revenue, operating income and cash generation increased, alongside disclosed acquisition integrations and scaled dialysis testing. These operating outcomes support execution beyond stated ambitions, although integration achievements are management reports. Impairments and rising days sales outstanding show imperfections.
governance · 3/4 · Existing disclosures establish ten independent directors out of eleven, independent standing committees, annual majority-vote elections and authority to retain independent advisers. Combined chairman and CEO roles constrain separation of authority. These structures support a strong grade without proving exceptional oversight outcomes.
Evidence
Assets and Capabilities Connectivity ● Provide healthcare connectivity solutions to approximately 612,000 clinician and hospital accounts and interface with over 1,000 electronic health records systems Data ● One of the world's largest databases of de-identifiable laboratory test results: >80 billion patient data points Logistics ● Strong logistics capabilities • make >83,000 stops daily • approximately 5,000 courier vehicles • 18 aircraft serving the United States Medical and Scientific Staff ● One of the largest medical and scientific staffs in the industry to provide interpretive consultation • Approximately 900 M.D.s and Ph.D.s, many of whom are recognized leaders in their field • Genetic counselors Other Healthcare Professionals ● Approximately 25,000 phlebotomists, paramedics, nurses and other health and wellness professionals Consumer Access ● Approximately 8,000 patient access points, including phlebotomists in physician offices, and an extensive patient service center network with approximately 2,400 locations, and mobile phlebotomy services Health Plan Participation ● Access to over 90% of U.S.
Business / Assets and Capabilities / connectivity, logistics and consumer access · Filed 26/02/2026
We serve approximately half the hospitals in the United States each year in many ways, including: •Serving as a hospital lab’s laboratory.
Business / Hospitals / annual hospital service reach · Filed 26/02/2026
In 2025, we generated approximately $1.2 billion in revenue from “reference testing,” where we perform testing that hospitals do not perform in their own in-hospital labs.
Business / Hospitals / 2025 reference-testing revenue · Filed 26/02/2026
In 2025, our Collaborative Lab Solutions (formerly known as Professional Laboratory Services) offering generated approximately $800 million in revenues and management fees supporting hospitals in the operation of their own labs.
Business / Hospitals / 2025 Collaborative Lab Solutions revenue and fees · Filed 26/02/2026
Our Invigorate program has consistently delivered 3% of annual cost savings and productivity improvements, which partly offset pressures from an inflationary environment, including labor and benefit cost increases, and reimbursement pressures.
Business / Operating Efficiency / disclosed Invigorate savings and cost pressures · Filed 26/02/2026
The diagnostic information services industry remains fragmented, is highly competitive and is subject to new competition.
Industry discussion / fragmentation and competition · Filed 26/02/2026
Consolidation is increasing pricing transparency, and may encourage internalization of clinical testing.
Industry discussion / consolidation, pricing transparency and testing internalization · Filed 26/02/2026
Pursuant to The Protecting Access to Medicare Act of 2014 ("PAMA"), reimbursement rates for many clinical laboratory tests provided under Medicare were reduced during 2018 - 2020.
Reimbursement discussion / realized Medicare rate reductions during 2018–2020 · Filed 26/02/2026
Inflationary pressures, along with the competition for labor, have also resulted in a rise of our labor costs, which include the costs of compensation, benefits and recruiting and training new hires.
Operating environment / realized labor cost inflation · Filed 26/02/2026
We expect to deliver value throughout the implementation of Project Nova, which is expected to be completed in 2031 to 2032, as it unlocks a variety of streamlined operational benefits, reduced technology-related operating costs, accelerated revenue opportunities, and improvements to the customer and patient experience.
Business / Operating Efficiency / prospective Project Nova benefits and completion · Filed 26/02/2026
Our key Collaborative Lab Solutions offerings include lab management outsourcing, test menu optimization and spend consolidation, supply chain management, and providing advanced data solutions.
Business / Hospitals / scope of lab-management services · Filed 26/02/2026
F-5 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2025, 2024 AND 2023 (in millions) 2025 2024 2023 Cash flows from operating activities: Net income $ 1,046 $ 921 $ 908 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 570 493 439 Provision for credit losses 3 5 1 Deferred income tax provision (benefit) 105 13 (49) Stock-based compensation expense 88 88 77 Other, net 24 15 41 Changes in operating assets and liabilities: Accounts receivable (106) (71) (15) Accounts payable and accrued expenses 129 (67) (55) Income taxes payable 24 16 (2) Other assets and liabilities, net 3 (79) (73) Net cash provided by operating activities 1,886 1,334 1,272 Cash flows from investing activities: Business acquisitions, net of cash acquired (101) (2,164) (611) Capital expenditures (527) (425) (408) Other investing activities, net (3) 41 (42) Net cash used in investing activities (631) (2,548) (1,061) Cash flows from financing activities: Proceeds from borrowings 410 1,846 2,592 Repayments of debt (1,012) (303) (1,844) Purchases of treasury stock (450) (151) (275) Exercise of stock options 79 73 72 Employee payroll tax withholdings on stock issued under stock-based compensation plans (45) (24) (28) Dividends paid (353) (331) (314) Distributions to noncontrolling interest partners (56) (47) (57) Other financing activities, net 39 21 14 Net cash (used in) provided by financing activities (1,388) 1,084 160 Effect of exchange rate changes on cash and cash equivalents and restricted cash 4 (7) — Net change in cash and cash equivalents and restricted cash (129) (137) 371 Cash and cash equivalents and restricted cash, beginning of year 549 686 315 Cash and cash equivalents and restricted cash, end of year $ 420 $ 549 $ 686 The accompanying notes are an integral part of these statements.
Consolidated Statements of Cash Flows / 2023–2025 · Filed 26/02/2026
4 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (unaudited) (in millions) Six Months Ended June 30, 2026 2025 Cash flows from operating activities: Net income $ 598 $ 531 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 293 283 Provision for credit losses 3 2 Deferred income tax expense 46 8 Stock-based compensation expense 43 43 Other, net 14 26 Changes in operating assets and liabilities: Accounts receivable (259) (115) Accounts payable and accrued expenses 130 (11) Income taxes payable 4 9 Other assets and liabilities, net 3 82 Net cash provided by operating activities 875 858 Cash flows from investing activities: Business acquisitions, net of cash acquired (38) (17) Capital expenditures (252) (225) Other investing activities, net 4 3 Net cash used in investing activities (286) (239) Cash flows from financing activities: Proceeds from borrowings 494 400 Repayments of debt (501) (1,001) Purchases of treasury stock (102) — Exercise of stock options 81 42 Employee payroll tax withholdings on stock issued under stock-based compensation plans (38) (42) Dividends paid (184) (174) Distributions to noncontrolling interest partners (22) (29) Other financing activities, net (109) (50) Net cash used in financing activities (381) (854) Effect of exchange rate changes on cash and cash equivalents and restricted cash (2) 5 Net change in cash and cash equivalents and restricted cash 206 (230) Cash and cash equivalents and restricted cash, beginning of period 420 549 Cash and cash equivalents and restricted cash, end of period $ 626 $ 319 The accompanying notes are an integral part of these statements.
Unaudited Consolidated Statements of Cash Flows / first half of 2026 and 2025 · Filed 23/07/2026
Controls and Procedures Controls and Procedures 40 1 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025 (unaudited) (in millions, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net revenues $ 3,043 $ 2,761 $ 5,938 $ 5,413 Operating costs and expenses and other operating income: Cost of services 2,016 1,818 3,969 3,607 Selling, general and administrative 529 486 1,033 962 Amortization of intangible assets 38 39 75 78 Other operating expense (income), net 1 (20) 3 (18) Total operating costs and expenses, net 2,584 2,323 5,080 4,629 Operating income 459 438 858 784 Other income (expense): Interest expense, net (63) (67) (126) (134) Other income, net 16 13 14 10 Total non-operating expense, net (47) (54) (112) (124) Income before income taxes and equity in earnings of equity method investees 412 384 746 660 Income tax expense (88) (97) (162) (156) Equity in earnings of equity method investees, net of taxes 10 9 14 27 Net income 334 296 598 531 Less: Net income attributable to noncontrolling interests 14 14 26 29 Net income attributable to Quest Diagnostics $ 320 $ 282 $ 572 $ 502 Earnings per share attributable to Quest Diagnostics’ common stockholders: Basic $ 2.88 $ 2.51 $ 5.15 $ 4.48 Diluted $ 2.84 $ 2.47 $ 5.08 $ 4.41 Weighted average common shares outstanding: Basic 111 112 110 112 Diluted 112 113 112 113 The accompanying notes are an integral part of these statements.
Unaudited Consolidated Statements of Operations / second quarter and first half of 2026 and 2025 · Filed 23/07/2026
Twelve Months Ended December 31, Increase 2025 2024 (Decrease) (dollars in millions, except per share data) Net revenues: Net revenues- external reporting purposes $ 11,035 $ 9,872 LifeLabs impact (acquired in August 2024) (722) (241) Net revenues- incentive reporting purposes $ 10,313 $ 9,631 Adjusted operating income: Operating income $ 1,556 $ 1,346 Restructuring and integration charges (a) 53 62 Change in fair value of contingent consideration (b) (10) 2 Other charges (c) 52 4 Other gains (d) (46) - Amortization expense 154 127 Adjusted operating income $ 1,759 $ 1,541 Adjusted operating income as a percentage of net revenues: Operating income as a percentage of net revenues 14.1% 13.6% 50 basis points Restructuring and integration charges (a) 0.5 0.6 Change in fair value of contingent consideration (b) (0.1) - Other charges (c) 0.4 0.1 Other gains (d) (0.4) - Amortization expense 1.4 1.3 Adjusted operating income as a percentage of net revenues 15.9% 15.6% 30 basis points Adjusted net income attributable to Quest Diagnostics: Net income attributable to Quest Diagnostics $ 992 $ 871 Restructuring and integration charges (a) (f) 45 47 Change in fair value of contingent consideration (b) (f) (10) 2 Other charges (c) (f) 39 3 Gains and losses on investments (e) (f) (4) 11 Other gains (d) (f) (41) (9) Amortization expense (f) 115 95 ETB (18) (9) Adjusted net income attributable to Quest Diagnostics $ 1,118 $ 1,011 Adjusted diluted EPS: Diluted earnings per common share $ 8.75 $ 7.69 13.8% Restructuring and integration charges (a) (f) 0.39 0.42 Change in fair value of contingent consideration (b) (f) (0.09) 0.02 Other charges (c) (f) 0.34 0.02 Gains and losses on investments (e) (f) (0.03) 0.10 Other gains (d) (f) (0.36) (0.08) Amortization expense (f) 1.01 0.84 ETB (0.16) (0.08) Adjusted diluted earnings per common share- external reporting purposes $ 9.85 $ 8.93 10.3% LifeLabs impact (acquired August 2024) (0.09) Adjusted diluted earnings per common share- incentive reporting purposes $ 8.84 a) For the twelve months ended December 31, 2025 and 2024, the pre-tax impact represents costs primarily associated with workforce reductions and integration costs incurred in connection with further restructuring and integrating our business.
Proxy Annex A / 2025 and 2024 reported results and incentive-reporting reconciliation · Filed 06/04/2026
2026 Proxy Statement A-2 c) The pre-tax impact for the twelve months ended December 31, 2025 includes an impairment charge of $29 million on certain long-lived assets related to the exit of a business and $15 million of charges to earnings related to legal matters.
Proxy Annex A / realized 2025 impairment and legal charges · Filed 06/04/2026
CC QC • N/A AC Audit and Finance Committee CC Compensation and Leadership Development Committee CS Cybersecurity Committee EX Executive Committee GC Governance Committee QC Quality and Compliance Committee FE Financial Expert ii 2026 Proxy Statement 2025 Executive Compensation Highlights Type Form Percentage of Equity Award for Named Executive Officers (%) Terms Equity • Performance Shares 50 • Performance metrics for 2025-2027 performance cycle: revenue growth, 50%; average return on invested capital, 30%; relative total stockholder return (relative to S&P 500 Healthcare Index companies), 20% • Vest after 3-year performance period • Stock Options 25 • 3-year ratable vesting • Restricted Share Units (“RSUs”) 25 • 3-year ratable vesting Cash • Salary • Reviewed and approved annually • Annual Incentive Compensation • Based on financial and non-financial goals Retirement • 401(k) Plan • Company matching contributions • Supplemental Deferred Compensation Plan • Company matching contributions Our Board is firmly committed to pay for performance.
Proxy Summary / actual 2025 executive compensation structure and performance metrics · Filed 06/04/2026
Payout on performance share awards for the three-year performance period ended December 31, 2025 was 154% of target.
Compensation Discussion / actual performance-share payout for period ended December 31, 2025 · Filed 06/04/2026
• We integrated eight acquisitions completed in 2024, providing the basis for growth in new geographies, including Canada.
2025 Strategic Progress / management report of eight acquisition integrations · Filed 06/04/2026
• We scaled lab testing to deliver services for more than 200,000 patients at Fresenius Medical Care's dialysis centers in the United States while also adding leading water-purity testing capabilities to our menu.
2025 Strategic Progress / scaled dialysis testing services · Filed 06/04/2026
Strong Corporate Governance Practices The Company’s strong corporate governance practices further ensure the Board’s effective, independent oversight of management, which include the following: • 10 out of 11 of our Board members are independent under NYSE and SEC rules; • The Company is committed to board refreshment, with 11 new directors since 2014; • Directors are elected annually by majority vote; • The Board’s five standing committees are composed entirely of independent directors; • Independent directors meet separately in executive session at least once a year and non-management directors generally meet at regularly scheduled sessions either before or after every regularly scheduled full Board meeting and at other times as these directors believe is appropriate; • Each Board member has full and unrestricted access to any officers and employees of the Company to discuss any aspect of the Company’s business; and • Each Board committee, which is chaired by an independent director, has the authority to retain independent legal, financial and other advisors as they may deem necessary, without consulting or obtaining the prior approval of any officer of the Company.
Governance / existing board independence, elections and committee authority · Filed 06/04/2026
Lassiter III Timothy Wentworth Mr. Davis, who is the Company’s Chairman, Chief Executive Officer and President, is not independent.
Governance / combined chairman, chief executive officer and president roles · Filed 06/04/2026
Days sales outstanding, a measure of billing and collection efficiency, was 50 days as of June 30, 2026, 48 days as of December 31, 2025 and 47 days as of June 30, 2025.
MD&A / billing and collection efficiency / days sales outstanding · Filed 23/07/2026
Starting in 2020, Congress has repeatedly acted to delay PAMA implementation by delaying the next round of data reporting (2020-2026) and Medicare cuts (2021-2026).
Reimbursement discussion / delays to PAMA reporting and Medicare cuts through 2026 · Filed 26/02/2026
Additionally, adjustments were made to remove the effects of significant transactions not contemplated or completed at the time performance measures were set, as follows: the performance measures were adjusted to : (i) eliminate the impact of LifeLabs (including on Invested Capital) and (ii) adjust Invested Capital to eliminate the impact of the 2023 refinancing of the Company’s 4.25% Senior Notes due 2024 and the 2024 refinancing of the Company’s 3.50% Senior Notes due 2025.
Compensation Discussion / exclusions and adjustments to performance-share calculations · Filed 06/04/2026
The following table summarizes the pre-tax impact of these other items on our consolidated statements of operations: Twelve Months Ended December 31, 2025 2024 (dollars in millions) Cost of services $ - $ 2 Selling, general and administrative 7 2 Other operating (income) expense, net 45 - Operating income $ 52 $ 4 d) The twelve months ended December 31, 2025 includes a $46 million pre-tax gain, recorded in other operating (income) expense, net, from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) associated with the retention of employees.
Proxy Annex A / 2025 payroll tax credit affecting reported operating income · Filed 06/04/2026
