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DaVita rises on 1Q earnings and Berkshire deal

NEW YORK (AP) -- Shares of DaVita HealthCare Partners Inc. advanced Wednesday after the dialysis-services company posted strong first-quarter results and reached an agreement with shareholder Berkshire Hathaway.

THE SPARK: On Tuesday, the Denver company said its net income dropped after it set aside $300 million for a legal contingency reserve. Excluding special items, however, DaVita said it earned $1.84 per share, and its revenue rose 53 percent to $2.83 billion.

Analysts expected a smaller profit of $1.79 per share and $2.77 billion in revenue, according to FactSet.

The company runs more than 2,000 dialysis service centers around the country. DaVita said it administered 5.6 million treatments during the quarter. Excluding acquisitions, treatments at older facilities grew 4.3 percent.

In 2012, DaVita bought doctor network operator HealthCare Partners in a cash-stock deal worth about $4.42 billion.

THE BIG PICTURE: The company raised its estimate for operating income based on the results: It now expects $1.8 billion to $1.9 billion in operating income, up from $1.75 billion to $1.9 billion.

The company announced Tuesday that Warren Buffett's Berkshire Hathaway Inc. has agreed to buy no more than 25 percent of DaVita's shares unless the two firms agree to it. Berkshire currently holds about 15 million shares of DaVita, which represents about 14 percent of the company's stock.

DaVita said it is in talks with the U.S. Department of Justice and U.S. Attorney's Office for the District of Colorado about a potential settlement to an investigation into payments the company made to physicians. The discussions are not finished, but the company decided to set aside $300 million related to an offer to settle the legal matters.

THE ANALYSIS: Citi Investment Research analyst Gary Taylor said the company's first-quarter results were "solid" and said it's good news that Berkshire Hathaway is interested in buying more DaVita stock — even though the 25 percent limit might be negative for investors who thought Berkshire Hathaway might buy DaVita in its entirety.

Taylor rates DaVita shares "Neutral" with a price target of $125.

SHARE ACTION: DaVita stock gained $11.81, or 10 percent, to $129.37 on Wednesday. During the day the shares reached an all-time high of $129.52. Over the last year, the shares have climbed about 51 percent.