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DaVita HealthCare Partners Inc. (DVA - Analyst Report) is set to report fourth-quarter 2013 results on Feb 11. Last quarter, it posted a 2.08% positive surprise. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

DaVita has been collaborating with a number of organizations to enhance operations. Its partnership with Shanghai Yangpu Antu Hospital in Nov 2012 to form a Renal Dialysis Technology Collaboration Base at the hospital is expected to strengthen DAVita’s foothold in China. The joint ventures with Arizona Integrated Physicains and Pacific Pharma Group, LLC are also likely to bolster company earnings in the fourth quarter.

However, DaVita’s debt refinancing continues to keep its financial leverage at elevated levels. In addition, interest expenses have significantly increased, aggravating its already high expenses. These factors might dampen the company’s financials in the fourth quarter of 2013. Moreover, rising unemployment is compelling people to shift from commercial insurance schemes to government programs due to wide disparity in payment rates. Consequently, the company might witness a decline in operating income in the upcoming period.

Earnings Whispers?

Our proven model does not conclusively show that DaVita is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zero Zacks ESP:  That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 98 cents. That is a difference of 0.00%.

Zacks Rank #2 (Buy): DaVita’s Zacks Rank #2 increases the predictive power of ESP but when combined with a zero ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is witnessing negative or zero estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

HEALTHSOUTH Corp. (HLS - Snapshot Report), with Earnings ESP of +4.55% and Zacks Rank #3.

PharMerica Corporation (PMC - Snapshot Report), with Earnings ESP of +9.09% and Zacks Rank #3.

Tenet Healthcare Corp. (THC - Analyst Report), with Earnings ESP of +17.65% and Zacks Rank #3.

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