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Can Kidney Care Business Drive DaVita's (DVA) Q2 Earnings?

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DaVita Inc.’s (DVA - Free Report) second-quarter 2018 results are scheduled to release on Aug 1, after market close. DaVita’s Kidney Care business is expected to drive the top line, while strategic collaborations are likely to aid overall results.

In the first quarter of 2018, the company reported adjusted earnings of $1.05 per share, beating the Zacks Consensus Estimate of 92 cents. Earnings increased 32.9% on a year-over-year basis.

Meanwhile, revenues came in at $2.85 billion, up 8.3% year over year. However, the figure lagged the Zacks Consensus Estimate of $2.96 billion.

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at 97 cents, reflecting year-over-year growth of  5.4%. The same for revenues stands at $2.88 billion, showing a year-over-year decline of 25.7%.

DaVita Inc. Price and EPS Surprise

 

DaVita Inc. Price and EPS Surprise | DaVita Inc. Quote

Let’s delve into other factors that are likely to impact DaVita’s second-quarter 2018 results.

Kidney Care Business & Dialysis Centers to Drive Q2

DaVita Medical Group & Kidney Care, also known as DMG, provides integrated care management as an operating division of the company and focuses on delivering healthcare through a broad range of services.

In the last reported quarter, net dialysis and related lab patient service revenues were $2.62 billion, up 13% year over year. The company has made progress on legislative provision issues that authorize private accreditation for dialysis providers. Notably, this can lead DaVita to open new facilities faster. In fact, management continues to expect Kidney Care operating income for 2018 in the range of $1.5 billion to $1.6 billion.

Additionally, acquiring dialysis centers has boosted the company’s top line to a large extent. By the end of the last reported quarter, adjusted U.S. dialysis and related lab services operating income was up 4.4% to $433.4 million.

We expect this trend to continue in the quarters ahead.

Other Factors at Play

Collaborations

Last month, DaVita and the University of Chicago Medicine announced the successful implementation of the Transplant Waitlist Support Program. It has been created to help keep patients on the waiting list transplant-ready. This improves chances of success for patients undergoing a transplant.

Earlier this year, the company announced endorsement of the Standardised Outcomes in Nephrology (SONG) initiative. Notably, it aims to standardize outcomes in kidney care trials. Per management, SONG is currently developing core outcomes for hemodialysis (SONG-HD), transplantation (SONG-Tx), peritoneal dialysis (SONG-PD), children and adolescents (SONG-Kids), and polycystic kidney disease (SONG-PKD).

International Presence

DaVita is steadily expanding in the international markets. In the past few years, the company has strengthened its position in the emerging and developing markets of Brazil, China, Colombia, Germany, India, Malaysia, Netherlands, Poland, Portugal and Saudi Arabia through strategic alliances as well as acquisitions of dialysis centers.

Debt Recovery

In the last reported quarter, DaVita recognized $24 million in Medicare bad debt recoveries. In the second quarter, management expects to recognize another $6 million to $8 million.

Our Model

Our quantitative model predicts an earnings beat for DaVIta in the quarter under review.

This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. It can be illustrated below:

Earnings ESP: Earnings ESP for DaVita is +0.86%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DaVIta carries a Zacks Rank #2.

Other Stocks to Consider

Here are a few other medical stocks worth considering as they also have the right combination of elements to post an earnings beat.

The Cooper Companies, Inc. (COO - Free Report) has an Earnings ESP of +1.53% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Teleflex Incorporated (TFX - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank #3.

PerkinElmer, Inc. has an Earnings ESP of +1.03% and a Zacks Rank #3.

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