DaVita HealthCare (DVA) Up 12% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for DaVita HealthCare (DVA). Shares have added about 12% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is DaVita HealthCare due for a pullback? 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 Q4 Earnings & Revenues Top Estimates, Margins Up

DaVita delivered adjusted earnings per share of $1.87 in the fourth quarter of 2023, down 36.4% sequentially. However, the figure topped the Zacks Consensus Estimate by 22.2%.

GAAP earnings per share from continuing operations for the quarter was $1.62, reflecting a surge of 174.6% year over year.

Full-year adjusted earnings per share was $8.47, up 28.3% compared with that at the end of the comparable 2022 period. The figure surpassed the Zacks Consensus Estimate by 4.9%.

Revenues in Detail

Revenues of $3.15 billion in the fourth quarter increased 4.6% year over year. The figure surpassed the Zacks Consensus Estimate by 4.8%.

The top line was driven by solid performances of DaVita’s dialysis patient service revenues and Other revenues.

Full-year revenues were $12.14 billion, reflecting a 7.9% improvement from the comparable 2022 period. The figure topped the Zacks Consensus Estimate by 1.2%.

Segment Details

DaVita generates revenues via two sources — Dialysis patient service revenues and Other revenues.

The dialysis patient service revenues were $2.97 billion, up 6% year over year.

Other revenues were $173.5 million, up 53.1% from the year-ago quarter’s figure.

Per management, the total U.S. dialysis treatments for the fourth quarter were 7,254,559 or 92,533 per day, on average. This represents a per-day increase of 0.04% on a sequential basis. Normalized non-acquired treatment growth in the fourth quarter of 2023 was 0.7% year over year.

As of Dec 31, 2023, DaVita provided dialysis services to around 250,200 patients at 3,042 outpatient dialysis centers, of which 2,675 were U.S. centers while 367 were located across 11 other countries.

During the fourth quarter of 2023, the company opened a total of two new dialysis centers and closed 21 dialysis centers in the United States. It also acquired eight dialysis centers and closed one dialysis center outside the United States in the same period.

Margin Details

In the quarter under review, DaVita’s gross profit rose 21.6% to $1.01 billion. The gross margin expanded 363 basis points (bps) to 32%.

General & administrative expenses climbed 5.7% to $401.5 million.

Adjusted operating profit totaled $605.9 million, reflecting a 35.1% uptick from the prior-year quarter’s level. Adjusted operating margin in the fourth quarter expanded 389 bps to 19.3%.

Financial Position

DaVita exited 2023 with cash and cash equivalents and short-term investments of $391.7 million compared with $321.8 million at 2022-end. Total debt (including the current portion) at the end of 2023 was $8.39 billion compared with $8.92 billion at 2022-end.

Cumulative net cash provided by operating activities at the end of 2023 was $2.06 billion compared with $1.56 billion a year ago.

2024 Guidance

DaVita has initiated its adjusted earnings per share outlook for 2024.

Adjusted earnings per share for the full year is projected to be in the range of $8.70-$9.80. The Zacks Consensus Estimate currently stands at $8.46.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 10.58% due to these changes.

VGM Scores

At this time, DaVita HealthCare has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, 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 B. 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 these revisions 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.

Performance of an Industry Player

DaVita HealthCare belongs to the Zacks Medical - Outpatient and Home Healthcare industry. Another stock from the same industry, Quest Diagnostics (DGX), has gained 1.3% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

Quest Diagnostics reported revenues of $2.29 billion in the last reported quarter, representing a year-over-year change of -1.9%. EPS of $2.15 for the same period compares with $1.98 a year ago.

Quest Diagnostics is expected to post earnings of $1.89 per share for the current quarter, representing a year-over-year change of -7.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -2.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Quest Diagnostics. Also, the stock has a VGM Score of B.

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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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