Expanding Access And Aging Demographics Will Redefine Diagnostics

Key Takeaways

• Accelerated cost-saving actions and structural expansion in recurring revenues are driving margins and earnings higher than consensus expectations.
  
• Unique market positioning and upcoming product launches could enable outsized, sustained revenue growth in underserved and rapidly expanding diagnostic segments.
  
• Shrinking pandemic-driven revenue, rising integration costs, and strong competition threaten margins and market stability, exposing QuidelOrtho to ongoing operational and innovation-related risks.

Catalysts

Provides diagnostic testing solutions.

• Analyst consensus anticipates incremental margin improvements from cost initiatives, but recent restructuring, site consolidation, larger headcount reductions, and accelerated indirect procurement savings are tracking ahead of schedule and could drive operating margins above 25 percent well before 2027, propelling earnings growth faster than current expectations.
  
• While analyst consensus expects steady growth in Labs and China, QuidelOrtho's extremely low market penetration in high-value segments like immunoassays in China-with minimal exposure to ongoing procurement headwinds-suggests an outsized, multi-year revenue acceleration is possible as they capture share in a vastly expanding and underserved market.
  
• The forthcoming LEX Diagnostics acquisition and molecular platform launch offers transformative upside; with six-minute PCR results, low cost of goods, and cross-selling via both Quidel and Ortho sales teams, there is potential to disrupt point-of-care testing and rapidly compound high-margin, recurring revenue as placements scale globally.
  
• A rapidly aging population and the global push for personalized, preventative medicine are set to drive exponential increases in diagnostic test volumes, especially in chronic disease management-trends that uniquely position QuidelOrtho's broad platform portfolio to outgrow underlying market rates, resulting in sustained, above-consensus revenue compounding.
  
• Structural expansion in recurring revenue streams from service contracts, reagent rentals, and long-term automation placements is underappreciated, likely yielding higher cash flow visibility and making future earnings power more robust than the market currently prices into the stock.

QuidelOrtho Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on QuidelOrtho compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming QuidelOrtho's revenue will grow by 3.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -17.0% today to 5.2% in 3 years time.
• The bullish analysts expect earnings to reach $156.9 million (and earnings per share of $2.17) by about August 2028, up from $-466.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 36.2x on those 2028 earnings, up from -3.8x today. This future PE is greater than the current PE for the US Medical Equipment industry at 27.2x.
• Analysts expect the number of shares outstanding to grow by 0.96% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.08%, as per the Simply Wall St company report.

QuidelOrtho Future Earnings Per Share Growth

Risks

• Declining COVID-19 testing revenues, which the company now expects to be $70 million to $100 million for 2025 compared to previous guidance of $110 million to $140 million, highlight a structural contraction that is expected to compress overall revenue and net margin in the long term as pandemic-driven demand recedes.
  
• Continued pressure from government reimbursement changes and volume-based procurement initiatives, particularly in China, could erode pricing power and squeeze gross margins, even though QuidelOrtho claims to have avoided significant immediate impact in 2025.
  
• The ongoing integration and restructuring costs following the Quidel/Ortho merger, exemplified by $179 million in restructuring, integration, and Savanna discontinuation charges this quarter, increase SG&A expenses and risk operational inefficiencies that could delay or dilute expected EBITDA margin improvements.
  
• Heavy reliance on a limited number of key platforms such as Sofia, Savanna (now discontinued), and VITROS exposes the business to competitive threats and technological disruption, which could reduce long-term revenue stability and result in market share erosion if innovation leaders outpace QuidelOrtho's portfolio refresh rate.
  
• Intensifying global competition from major multinationals and low-cost market entrants-combined with the industry shift toward advanced multiplex and decentralized diagnostics-may weaken QuidelOrtho's market position, leading to increased pricing pressure and heightened risk that future revenues and earnings growth will underperform expectations over the long run.

Valuation

• The assumed bullish price target for QuidelOrtho is $60.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of QuidelOrtho's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $26.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $3.0 billion, earnings will come to $156.9 million, and it would be trading on a PE ratio of 36.2x, assuming you use a discount rate of 11.1%.
• Given the current share price of $25.93, the bullish analyst price target of $60.0 is 56.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.