DaVita (DVA) Beats Q1 Earnings Estimates, Reiterates View

DaVita Inc. DVA reported first-quarter 2018 adjusted operating earnings of $1.05 per share, beating the Zacks Consensus Estimate of 92 cents. Earnings increased 32.9% on a year-over-year basis.

Total revenues increased 8.3% year over year to $2.85 billion but missed the Zacks Consensus Estimate of $2.96 billion.

DaVita carries a Zacks Rank #3 (Hold).

Business Details

Net dialysis and related lab patient service revenues in the first quarter were $2.62 billion, up 13% year over year. Other revenues were $232 million, down 26.2% on a year-over-year basis.

DaVita saw impressive results from the Kidney Care business. Net consolidated revenues in the segment were $2.85 billion, up 8.3% year over year. Adjusted Kidney Care operating income was $411 million, up 8.2% year over year. As an operating division of DaVita, DaVita Kidney Care focuses on setting worldwide standards for clinical, social and operational practices in kidney care.

Adjusted U.S. dialysis and related lab services operating income in the first quarter was up 4.4% to $433.4 million. U.S. dialysis treatments for the first quarter of 2018 were 7,174,026, or 92,568 treatments per day. This represents an increase of 4.8% year over year.

 

DaVita Inc. Price, Consensus and EPS Surprise

 

DaVita Inc. Price, Consensus and EPS Surprise | DaVita Inc. Quote

 

The company’s patient care costs were up approximately 25 cents per treatment compared with the last reported quarter.

For investors’ notice, the company’s major segment — DaVita Medical Group (“DMG”) — is on track for divestment to Optum, a subsidiary of UnitedHealth Group Inc. This transaction is subject to regulatory approvals and other customary closing conditions. The results of DMG business’ operations have been reported as discontinued in the quarter under review.

Share Repurchase Update

During the first quarter, DaVita repurchased a total of 4.2 million shares for approximately $298 million at an average price of $71.09 per share.

Through May 2, 2018, DaVita has repurchased 8.5 million shares for $574 million on a year-to-date basis. This represents nearly 5% of the company’s total shares outstanding. This also includes approximately $500 million of stock repurchase.

Guidance

DaVita reiterated guidance for 2018.

For 2018, the company projects Kidney Care consolidated operating income in the range of $1.5-$1.6 billion. Operating cash flow from continuing operations is estimated in the range of $1.4-$1.6 billion. Effective tax rate is expected in the range of 26.5-27.5%.

In Conclusion

DaVita ended the first quarter of 2018 on a mixed note with adjusted earnings beating the Zacks Consensus Estimate and revenues missing the same. The company saw impressive results from the Kidney Care business lately. As an operating division of DaVita, DaVita Kidney Care focuses clinical, social and operational practices worldwide. The company’s efforts to control expenses hold promise. A compelling inorganic growth story is another positive.

On the flip side, sluggishness in the Other business is a major headwind for DaVita. The company is facing the adverse effects of the pricing pressure in the U.S. medical industry and rise in Medicare insurance costs. The company’s major segment — DaVita Medical Group— has been on track for the divestment to Optum, a subsidiary of UnitedHealth Group Inc. Further, high debt levels, adverse effects of healthcare reforms and increase in Medicare-Advantage beneficiaries are concerns.

Q1 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season, are Baxter International Inc. BAX, Varian Medical Systems, Inc. VAR and Intuitive Surgical, Inc. ISRG.

While Intuitive Surgical and Varian sport a Zacks Rank #1 (Strong Buy), Baxter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Baxter reported first-quarter 2018 adjusted earnings per share of 70 cents, which beat the Zacks Consensus Estimate by 12.9% and improved from the year-ago quarter’s figure of 58 cents.

Varian reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.

Intuitive Surgical reported adjusted earnings of $2.44 per share, which surpassed the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, which beat the Zacks Consensus Estimate by 10.6%.

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