11:59 AM EDT, 10/22/2025 (MT Newswires) -- Quest Diagnostics' ( DGX ) fundamentals remain strong despite a temporary margin "blip" that weighed on its stock, Morgan Stanley said in a note emailed Wednesday.

The brokerage said margins were pressured by higher employee medical costs in Q3 and are expected to see another sequential decline in Q4 due to seasonal factors and planned investments. Still, margins should expand year over year in 2025, supported by a robust utilization environment.

Shares underperformed despite a solid beat and raise, as high expectations and margin concerns overshadowed otherwise strong fundamentals, the firm said.

Quest lifted its 2025 revenue growth outlook to 11% to 11.4%, now reflecting 4.5% to 5% organic growth, compared with 3.5% to 4% previously, highlighting healthy underlying demand across channels.

Quest's consumer testing platform, Questhealth.com, continues to gain traction, with revenue up 30% to 40% so far this year, supported by partnerships and repeat customer growth, according to the note.

Morgan Stanley raised its 2025 earnings estimate to $9.81 per share from $9.76 following the Q3 beat.

The firm reiterated its overweight rating on the stock and raised its price target to $207 from $191, citing durable demand and relative insulation from policy risks.

Shares of Quest Diagnostics ( DGX ) were down 1.5% in recent Wednesday trading.

Price: 181.90, Change: -2.74, Percent Change: -1.48