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Why Is DaVita HealthCare (DVA) Down 2.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for DaVita HealthCare (DVA). Shares have lost about 2.3% 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 Beats on Q2 Earnings, Raises 2021 Earnings Per Share View

DaVita delivered earnings per share of $2.64 in the second quarter of 2021, improving 62.9% year over year. The figure surpassed the Zacks Consensus Estimate by 23.4%.

Revenues in Detail

Revenues of $2.92 billion in the second quarter were up 1.3% year over year. The figure surpassed the Zacks Consensus Estimate by 1.4%.

The top line was driven by favorable changes in government mix and rate (including increases owing to shifts to Medicare Advantage plans), and normal seasonal improvements, led by patients meeting their co-insurance and deductibles. However, this year-over-year uptick was partially offset by a fall in hospital inpatient dialysis revenues.

Segment Details

The company’s dialysis patient service revenues were $2.82 billion, up 2.2% year over year. Other revenues were $98.6 million, down 19.1% from the year-ago quarter’s figure.

Per management, total U.S. dialysis treatments for the second quarter were 7,413,497 or 95,045 treatments per day, on average. This represents a per-day decrease of 2.1% on a year-over-year basis.

As of Jun 30, 2021, DaVita provided dialysis services to around 242,300 patients at 3,159 outpatient dialysis centers, of which 2,828 centers were located in the United States and 331 across 10 countries outside the United States.

During the second quarter of 2021, the company acquired one dialysis center, opened a total of 13 dialysis centers and closed 13 in the United States. It also acquired five dialysis centers and opened three outside the United States in the same period.

Margin Details

In the quarter under review, DaVita’s gross profit rose 6.2% to $951.2 million. Gross margin expanded 152 basis points (bps) to 32.6%.

General & administrative expenses fell 5.7% to $298.1 million.

Adjusted operating profit totaled $653.1 million, reflecting a 12.8% uptick from the prior-year quarter’s level. Adjusted operating margin in the second quarter expanded 228 bps to 22.4%.

Financial Position

DaVita exited the second quarter of 2021 with cash and cash equivalents, and short-term investments of $1.08 billion compared with $895.3 million at the end of the first quarter. Total debt (including current portion) at the end of the second quarter of 2021 was $8.98 billion compared with $8.99 billion at the end of first quarter.

Cumulative net cash flow from operating activities at the end of the second quarter was $834 million compared with $1.01 billion a year ago.

DaVita repurchased 2,069,854 shares of its common stock for $241 million during the reported quarter. Management also informed that between Jun 30 and Aug 2, the company repurchased 889,594 shares of its common stock for $107 million.

2021 Guidance

On the back of its performance to date, DaVita raised its financial outlook for the full -year.

Adjusted earnings per share is projected within $8.80-$9.40, up from the previous guidance of $8.20-$9. The Zacks Consensus Estimate for the same currently stands at $8.90.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

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 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, DaVita HealthCare has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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