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Why Is DaVita HealthCare (DVA) Down 5% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for DaVita HealthCare (DVA). Shares have lost about 5% in that time frame, underperforming the S&P 500.

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

DaVita Earnings Beat Estimates in Q2, Guidance Impressive

DaVita reported second-quarter 2019 adjusted earnings per share of $1.22, beating the Zacks Consensus Estimate of $1.10. The figure rose 16.2% on a year-over-year basis.

Total revenues in the quarter declined 1.5% year over year to $2.84 billion, missing the Zacks Consensus Estimate of $2.85 billion. Second-quarter adjusted operating income totaled $462 million, up 5.5% year over year.

Segment Details

Net dialysis and related lab patient service revenues in the second quarter totaled $2.63 billion, up 1.9% on a year-over-year basis. Other revenues were $6 million, up 20% from the year-ago quarter’s figure.

Per management, total U.S. dialysis treatments for the second quarter were 7,520,587, or an average of 96,418 treatments per day, representing a per day increase of 2.6% year over year.

Moreover, the company provided dialysis services at 2, 2,971 outpatient dialysis centers, of which 2, 2,723 centers were located in the United States and 248 in nine countries outside the United States.

The company has also gained from calcimimetics. In the quarter under review, DaVita generated operating income of approximately $40 million from calcimimetics.

For investors’ notice, the company has completed the divestment of the DaVita Medical Group (“DMG”) division to Optum, a subsidiary of UnitedHealth Group for a deal value of $4.34 billion.

Financial Condition

DaVita exited the second quarter with operating cash flow of $574 million.

Guidance

DaVita issued an impressive guidance for 2019.

Notably, the company now expects adjusted operating income between $1.64 billion and $1.70 billion. This reflects a significant increase from the earlier projected range of $1.54 billion to $1.64 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 8.16% due to these changes.

VGM Scores

At this time, DaVita HealthCare has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise DaVita HealthCare has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.



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