By Caroline Humer
(Reuters) - Quest Diagnostics Inc, the No. 1 clinical laboratory-testing company, lowered expectations for 2012 earnings and revenue and said restructuring charges related to a cost-cutting plan had cut into what would otherwise have been flat profit.
Quest, whose shares were down nearly 4 percent on Wednesday morning, has seen slowing growth as the economy and uncertain reimbursements have resulted in fewer lab tests. It is in the midst of a cost-cutting program that aims to trim spending by $500 million.
The stock decline reflects disappointment in the results, which show a continued tough environment for Quest, according to Amanda Murphy, analyst at William Blair & Co.
"The reality is that volume remains challenging," she said. "Reimbursement remains challenging."
The company on Wednesday reported third-quarter net income from continuing operations of $163 million, or $1.01 per share, down from $172 million or $1.08 per share a year earlier. That includes a 17-cent charge for restructuring in the third quarter, and 10 cents during the year-earlier quarter.
Quest said third-quarter adjusted income was $190 million, or $1.18 per share, in line with analyst consensus.
It reported a 3 percent decline in revenue to $1.9 billion and said that for the year, it now expects revenue to grow about 0.5 percent. Previously it had forecast growth of 1 to 2 percent.
The revenue decline was due to a drop in volume of its clinical testing business, although increases in expensive tests offset some continued reimbursement pressure, Chief Financial Officer Robert Hagemann told analysts on a conference call.
Hagemann said nonclinical revenue fell about 10 percent, mostly owing to a decline in clinical trials conducted by pharmaceutical companies.
Hagemann and other executives talked about future reimbursement pressure and possible changes in demand as hospitals buy physician groups and take on some of the lab work that had formerly gone to Quest. "It paints a difficult picture," analyst Murphy said.
Quest lowered its 2012 earnings outlook to $4.45 to $4.55 per share, compared with a prior outlook of $4.45 to $4.60 per share.
Quest's shares were down 3.8 percent at $60.94 on Wednesday morning on the New York Stock Exchange.
(Reporting by Caroline Humer in New York; editing by Chizu Nomiyama, Maureen Bavdek and Matthew Lewis)