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Will Q3 Earnings Hold a Surprise for Davita (DVA) Stock?
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DaVita HealthCare Partners Inc.(DVA - Free Report) is set to report third-quarter 2016 results after the market closes on Nov 2. Last quarter, the company posted a positive earnings surprise of 3.06%. Let’s see how things are shaping up for this announcement. . Factors to be Considered this Quarter
Davita’s Kidney Care is expected to have performed well in the third quarter due to its continuous investments in capital-efficient technologies. Launch of seven new de novo clinics, which is a clear instance of this, is likely to have significantly boosted the top line of this segment.
Growth in Kidney Care is also likely have been supported by two new legislations, namely Dialysis PATIENT Demonstration Act and ESRD Choice Act. Both these acts are expected to have bolstered Davita’s long-term strategy of integrated care.
The joint venture with Khazanah and Mitsui Khazanah might have further driven growth of Davita’s Kidney Care business. However, the company plans to deconsolidate these two in the future in order to record a material non-cash one-time gain.
The expansion of Affordable Care Act (ACA) is expected to have boosted Davita’s revenues through increased market share.
Continuously weighing capital deployment opportunities across growth investment, share repurchases, debt repayment and holding cash likely have driven the company’s operating margin by limiting the share count.
Operating cash flow is expected to have remained strong in the quarter due to improved performance of the Kidney Care business and the capitated care business.
However, management believes that Davita’s the inability to meet the target of fee-for-service revenue growth and the costs expected to be incurred due to the rebranding from HealthCare Partners to the DaVita Medical Group might result in its underperformance in the quarter.
Also, an overestimation of expected reconciliation payments for Medicare Advantage revenues is might result in the company missing estimates in the to-be-reported quarter.
In addition, interest expenses are expected to remain elevated owing to higher level of debt-tapering margins.
The company’s share price has been fluctuating over the last few days. We wait to see how the stock reacts to the quarterly results.
Our proven model does not conclusively show that DaVita Healthcare is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.26%. This is because the Most Accurate estimate of 98 cents is pegged higher than the Zacks Consensus Estimate of 94 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: DaVita carries a Zacks Rank #4 (Sell). Please note that the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
Here are some companies from the Medical sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
Humana Inc.(HUM - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #2. The company is expected to report third-quarter earnings results on Nov 4.
Ariad Pharmaceuticals Inc. has an Earnings ESP of +5.26% and a Zacks Rank #2. The company is slated to report third-quarter earnings results on Nov 1.
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Will Q3 Earnings Hold a Surprise for Davita (DVA) Stock?
DaVita HealthCare Partners Inc.(DVA - Free Report) is set to report third-quarter 2016 results after the market closes on Nov 2. Last quarter, the company posted a positive earnings surprise of 3.06%. Let’s see how things are shaping up for this announcement.
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Factors to be Considered this Quarter
Davita’s Kidney Care is expected to have performed well in the third quarter due to its continuous investments in capital-efficient technologies. Launch of seven new de novo clinics, which is a clear instance of this, is likely to have significantly boosted the top line of this segment.
Growth in Kidney Care is also likely have been supported by two new legislations, namely Dialysis PATIENT Demonstration Act and ESRD Choice Act. Both these acts are expected to have bolstered Davita’s long-term strategy of integrated care.
The joint venture with Khazanah and Mitsui Khazanah might have further driven growth of Davita’s Kidney Care business. However, the company plans to deconsolidate these two in the future in order to record a material non-cash one-time gain.
The expansion of Affordable Care Act (ACA) is expected to have boosted Davita’s revenues through increased market share.
Continuously weighing capital deployment opportunities across growth investment, share repurchases, debt repayment and holding cash likely have driven the company’s operating margin by limiting the share count.
Operating cash flow is expected to have remained strong in the quarter due to improved performance of the Kidney Care business and the capitated care business.
However, management believes that Davita’s the inability to meet the target of fee-for-service revenue growth and the costs expected to be incurred due to the rebranding from HealthCare Partners to the DaVita Medical Group might result in its underperformance in the quarter.
Also, an overestimation of expected reconciliation payments for Medicare Advantage revenues is might result in the company missing estimates in the to-be-reported quarter.
In addition, interest expenses are expected to remain elevated owing to higher level of debt-tapering margins.
The company’s share price has been fluctuating over the last few days. We wait to see how the stock reacts to the quarterly results.
DAVITA INC Price and EPS Surprise
DAVITA INC Price and EPS Surprise | DAVITA INC Quote
Earnings Whispers
Our proven model does not conclusively show that DaVita Healthcare is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.26%. This is because the Most Accurate estimate of 98 cents is pegged higher than the Zacks Consensus Estimate of 94 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: DaVita carries a Zacks Rank #4 (Sell). Please note that the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.
Stocks to Consider
Here are some companies from the Medical sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
WellCare Health Plans Inc., which is expected to report third-quarter earnings results on Nov 1, has an Earnings ESP of +3.6% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Humana Inc.(HUM - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #2. The company is expected to report third-quarter earnings results on Nov 4.
Ariad Pharmaceuticals Inc. has an Earnings ESP of +5.26% and a Zacks Rank #2. The company is slated to report third-quarter earnings results on Nov 1.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>