QuidelOrtho Faces Critical Earnings Test Amid Diverging Analyst Views

QuidelOrtho shares are approaching a pivotal moment as the company prepares to release its third-quarter financial results after market close on Wednesday. The diagnostic specialist's upcoming report has generated conflicting expectations among market observers, with some analysts expressing significant concerns while others anticipate potential positive developments.

Recent analyst actions have painted a concerning picture for QuidelOrtho's near-term prospects. In early October, Citigroup downgraded the stock from "Buy" to "Neutral" while substantially reducing its price target from $40 to $33. The financial institution cited declining demand for COVID-19 testing products and delays in new product launches as primary reasons for this more cautious stance. The market response was immediate, with shares declining 4.4% on the day of the downgrade announcement.

The bearish sentiment extends beyond Citigroup, with multiple research firms expressing reservations:
- Weiss Ratings maintained its "Sell" recommendation in late October
- Zacks Research escalated its concerns by downgrading to "Strong Sell"
- The consensus price target among analysts currently sits at just $37.80

Previous Performance Offers Hope

Despite the current skepticism, QuidelOrtho's recent track record provides some grounds for optimism. The company's second-quarter performance exceeded market expectations, delivering:
- Adjusted earnings per share of $0.12, significantly above the $0.01 forecast
- Total revenue of $614 million, surpassing the $612 million projection
- Reaffirmation of full-year guidance

Should investors sell immediately? Or is it worth buying Quidelration?

For the upcoming third-quarter report, financial experts project adjusted earnings between $0.46 and $0.62 per share, with revenue anticipated around $667 million. While these targets represent a challenging hurdle, the company's maintained outlook suggests management confidence in achieving these results.

Strategic Shifts Address Changing Market

As COVID-19 testing revenue continues to diminish, QuidelOrtho is implementing strategic initiatives to diversify its business operations. The company plans to acquire LEX Diagnostics for $100 million, a move designed to strengthen its position in the point-of-care diagnostics segment. Additionally, September saw the launch of a combined influenza and SARS test targeted at professional healthcare users.

The critical question facing investors is whether these new ventures can sufficiently offset the declining coronavirus-related income. Wednesday's earnings release and subsequent management commentary may provide crucial insights into this transition period, potentially determining the stock's trajectory for the remainder of the year.