DaVita Tops Zacks Estimate

DaVita Inc. (DVA - Analyst Report) reported third quarter net income of $110.9 million or $1.06 per share, which was better than the Zacks Consensus Estimate of 99 cents. The company earned $93.9 million or 89 cents in the comparable quarter of 2008. 

Revenues for the quarter came in at $1.57 billion, which reflected an 8.3% increase over the year-ago quarter. According to segments, revenues from the Dialysis and Related Lab Services segment for the quarter came in at $1.49 billion as against $1.38 billion in the prior-year quarter. Other - Ancillary Services and Strategic Initiatives segment generated revenues of $83 million as against $69 million in the year-ago quarter. Highlights of the strong display in the reported quarter included consistent volume growth, stable private pricing and strong cash flows. 

Total treatments for the quarter came in at approximately 4.34 million, or 54,927 treatments per day, representing a per day increase of 6.1% over the year-ago quarter. Non-acquired treatment growth in the quarter was 5.2% over the prior-year period. The largest provider of dialysis services to patients suffering from End-Stage Renal Disease (ESRD) reported a $2.79 increase per treatment from the previous quarter. An increase in physician-prescribed pharmaceuticals coupled with a rise in drug reimbursement rates based on average sales price contributed to this increase. 

By the end of the reported quarter, DaVita operated or provided administrative services at 1,513 outpatient dialysis centers, thereby serving approximately 117,000 patients. Furthermore, during the quarter, the company acquired four centers, opened 21 new centers, merged five centers, shut down one center and provided administrative and management services to an additional third-party owned center. 

DaVita exited the quarter with operating cash flow of $167 million, while $125 million represented the free cash flow. The company's effective tax rate was 37.0% in the reported quarter, which was impacted by the amount of third party owners' income attributable to non-tax paying entities. However, the effective tax rate attributable to DaVita in the quarter was 40.0%. 

DaVita raised its operating income guidance for 2009 to $930 million–$950 million from its prior guidance of $900 million–$930 million. Management expects to modestly exceed the operating cash flow guidance of $550 million−$600 million. The company expects 2010 operating income to lie between $950 million and $1.02 billion. 

Currently, we are Neutral on DaVita.