Yahoo Finance DaVita (DVA) Q4 Earnings Beat Estimates, Margins Down
DaVita Inc. DVA delivered adjusted earnings per share (EPS) of $1.11 in the fourth quarter of 2022, which declined 45% year over year. The figure topped the Zacks Consensus Estimate by 26.1%.
Our projection of adjusted EPS was 86 cents.
GAAP EPS for the quarter was 74 cents, reflecting a plunge of 58.7% year over year.
Full-year adjusted EPS was $6.60, down 28.6% from the end of 2021. Our projection of full-year adjusted EPS was $6.27.
Revenues in Detail
Revenues of $2.92 billion in the fourth quarter were down by 0.9% year over year. The figure missed the Zacks Consensus Estimate by 0.8%.
The fourth-quarter revenues compare to our estimate of $2.93 billion.
Management noted that the top line was aided by non-recurring favorable adjustments in the third quarter. However, the quarterly revenues were negatively impacted by increased hospital inpatient dialysis revenues, favorable changes in government rates driven by the administration of influenza vaccines, favorable changes in the commercial mix and the continued migration to Medicare Advantage plans.
Full-year revenues were $11.61 billion, reflecting a 0.1% dip from the comparable 2021 period. Our projection of full-year revenues was $11.63 billion.
Segment Details
The company’s dialysis patient service revenues were $2.80 billion, down by 1.4% year over year. Other revenues were $113.3 million, up 12.2% from the year-ago quarter’s figure.
This figure compares to our dialysis patient service revenues and Other revenues fourth-quarter projection of $2.83 billion and $106.2 million, respectively.
Per management, the total U.S. dialysis treatments for the fourth quarter were 7,239,660 or 91,641 per day, on average. This represents a per-day decrease of 1.3% on a sequential basis.
As of Dec 31, 2022, DaVita provided dialysis services to around 245,000 patients at 3,074 outpatient dialysis centers, of which 2,724 were U.S. centers while 350 were located across 11 other countries.
During the fourth quarter of 2022, the company opened a total of six new dialysis centers and closed 58 dialysis centers in the United States. It also acquired three dialysis centers, opened three dialysis centers and closed eight dialysis centers outside the United States in the same period.
DaVita Inc. Price, Consensus and EPS Surprise
DaVita Inc. price-consensus-eps-surprise-chart | DaVita Inc. Quote
Margin Details
In the quarter under review, DaVita’s gross profit fell 6.3% to $828.2 million. Gross margin contracted 163 basis points (bps) to 28.4%.
We had projected a 25.5% of gross margin for the fourth quarter.
General & administrative expenses climbed 17.7% to $379.7 million.
Adjusted operating profit totaled $448.5 million, reflecting a 20.1% plunge from the prior-year quarter’s level. Adjusted operating margin in the fourth quarter contracted 368 bps to 15.4%.
Financial Position
DaVita exited the full-year 2022 with cash and cash equivalents, and short-term investments of $321.8 million compared with $484.2 million at the end of 2021. Total debt (including the current portion) at the end of the full-year 2022 was $8.92 billion compared with $8.91 billion at the end of 2021.
Cumulative net cash flow from operating activities at the end of 2022 was $1.56 billion compared with $1.93 billion a year ago.
DaVita did not repurchase any shares during the fourth quarter of 2022.
2023 Guidance
DaVita has initiated its financial outlook for the full-year 2023.
Adjusted EPS from continuing operations for the full year is projected to be in the range of $5.45-$6.95. The Zacks Consensus Estimate for the same currently stands at $6.46.
Our Take
DaVita ended the fourth quarter of 2022 with lower-than-expected revenues. The dismal overall top-line and bottom-line results are disappointing. A fall in the company’s dialysis patient service revenues and total U.S. dialysis treatments during the quarter is concerning. The contraction of both margins also does not bode well for the company. The company faced negative volume trends and continued labor pressure during the reported quarter, which is further concerning.
However, DaVita’s better-than-expected earnings are encouraging. The uptick in the company’s Other revenues during the period is impressive. The acquisition of several dialysis centers and the opening of others within the United States and overseas is also encouraging.
Zacks Rank and Stocks to Consider
DaVita currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Becton, Dickinson and Company BDX, popularly known as BD, McKesson Corporation MCK and Hologic, Inc. HOLX.
BD, carrying a Zacks Rank #2 (Buy), reported first-quarter fiscal 2023 adjusted EPS of $2.98, beating the Zacks Consensus Estimate by 11.6%. Revenues of $4.59 billion outpaced the consensus mark by 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
BD has a long-term estimated growth rate of 7.8%. BDX’s earnings surpassed estimates in all the trailing four quarters, the average being 6.5%.
McKesson, having a Zacks Rank #2, reported third-quarter fiscal 2023 adjusted EPS of $6.90, which beat the Zacks Consensus Estimate by 8.8%. Revenues of $70.49 billion outpaced the consensus mark by 0.02%.
McKesson has a long-term estimated growth rate of 10.4%. MCK’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 3.4%.
Hologic reported first-quarter fiscal 2023 adjusted earnings of $1.07 per share, beating the Zacks Consensus Estimate by 18.9%. Revenues of $1.07 billion surpassed the Zacks Consensus Estimate by 9.5%. It currently sports a Zacks Rank #1.
Hologic has a long-term estimated growth rate of 15.2%. HOLX’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 30.6%.
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