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DaVita HealthCare (DVA) Down 9.1% Since Earnings Report: Can It Rebound?

Zacks Equity Research

More than a month has gone by since the last earnings report for DaVita HealthCare Partners Inc. DVA. Shares have lost about 9.1% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

DaVita Beat Earnings and Revenue Estimates in Q2

DaVita Inc. reported second-quarter 2017 adjusted operating earnings of $0.92 per share that came above the Zacks Consensus Estimate of $0.90. However, earnings declined from $1.01 in the year-ago quarter.

Total revenue increased from $3.72 billion year over year to approximately $3.88 billion and beat the Zacks Consensus Estimate of $3.84 billion.

Segment Update

U.S. Dialysis and Related Lab Services

Total operating revenue during the second quarter was approximately $2.33 billion, up from $2.26 billion in the year-ago quarter. However, operating income was up from $449 million in the year-ago quarter to $450 million.

Davita Medical Group (DMG)

Total operating revenue during the second quarter was $1.20 billion, up from $1.06 billion in the year-ago quarter. Also, the segment’s adjusted operating loss came in at $13 million versus the prior-year’s quarter loss of $102 million.

Financial Update

Total cash and cash equivalents of DaVita declined to $712.0 million as of Jun 30, 2017 from $913.2 million as of Dec 31, 2016. Cash generated from operations in the first half of 2017 was $1.01 billion compared with $945.6 million in the year-ago period. As of Jun 30, 2017, DaVita’s long-term debt was $8.91 billion, down from $8.95 billion at year-end 2016. In the reported quarter the company repurchased 3.6 million shares of its common stock for $232 million, at an average price of $64.81 per share. The company currently has approximately $445 million outstanding Board authorized share repurchase authorization pending.

Guidance

Management projected DaVita’s consolidated operating income for 2017 in the range of $1.675–$1.775 billion. The company expects operating income of $1.565–$1.625 billion for Kidney Care. Operating income for DMG is now anticipated in the range of $110–$150 million. Operating cash flow projection for 2017 is expected at $1.750–$1.950 billion.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

DaVita HealthCare Partners Inc. Price and Consensus

 

DaVita HealthCare Partners Inc. Price and Consensus | DaVita HealthCare Partners Inc. Quote

VGM Scores

At this time, DaVita HealthCare's stock has an average Growth Score of C, however its Momentum is lagging a lot with a F.  The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for growth to a lesser degree.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.


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