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DaVita (DVA) to Report Q2 Earnings: What's in the Offing?

DaVita, Inc. DVA is scheduled to release second-quarter 2020 results on Jul 30, after market close.

In the last-reported quarter, the company delivered an earnings surprise of 25.3%. Its earnings surpassed estimates in each of the trailing four quarters, the average beat being 18.2%.Let’s take a look at how things are shaping up prior to this announcement.

What do the Q2 Estimates Say?

For the second quarter, the Zacks Consensus Estimate for revenues is pegged at $2.91 billion, indicating a rise of 2.5% from the year-ago quarter. The same for earnings per share (EPS) is pinned at $1.29, suggesting 5.7% growth over the year-ago reported figure.

Factors at Play

Robust performance within net dialysis and related lab patient service segment are likely to have contributed to DaVita’s top line in the soon-to-be-reported quarter.

Lately, the company has been working with predictive analytics to identify chronic kidney diseases patients with the highest risk of transition to End Stage Renal Disease (ESRD). The company has also been making progress with its nephrology care line, which is a new physician-led entity with around 1,100 nephrologists. This is expected to have facilitated the connection of DaVita to the nephrologist practice in the second quarter.

Unlike first-quarter 2020, which had witnessed partial impact of the COVID-19 pandemic, the second quarter bore the entire brunt of it. The pandemic is expected to have had a negative impact on the company’s business through its effect on the late-stage Chronic Kidney Disease (CKD) population and on the health status of its existing ESRD patients.

DaVita Kidney Care also provided support to nephrologist-led organizations like Nephrology Care Alliance (NCA) in their endeavor to treat patients of chronic kidney diseases. In May 2020, DaVita launched the DaVita Venture Group (“DVG”), through which it plans to accelerate efforts to develop and deploy solutions aimed at improving the health care and quality of life for patients of kidney disease and related chronic conditions.

These developments are expected to get reflected on second-quarter results.

During the first quarter, DaVita opened a total of 22 new dialysis centers and acquired two in the country. Outside the United States, the company launched three new dialysis centers and acquired 22. This is likely to have had a positive impact on the company’s second-quarter performance.

DaVita Inc. Price and EPS Surprise

DaVita Inc. Price and EPS Surprise

DaVita Inc. price-eps-surprise | DaVita Inc. Quote

However, by the end of the first quarter, the profitability from calcimimetics was on a declining trajectory. This is expected to have had an adverse impact on the second-quarter performance as well.

DaVita earns a significant part of its revenues from overseas operations and acquisition of dialysis centers abroad. Unfavorable currency movements are likely to have impacted the company’s international salesin the second quarter of 2020.

What Our Quantitative Model Suggests

Per our proven model, a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see.

Although DaVita carries a Zacks Rank #3, its Earnings ESP of -2.43% makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Integra LifeSciences Holdings Corporation IART has an Earnings ESP of +20.69% and a Zacks Rank of 2.

Exact Sciences Corporation EXAS has an Earnings ESP of +6.69% and a Zacks Rank of 2.

Hologic, Inc. HOLX has an Earnings ESP of +14.56% and a Zacks Rank of 3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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