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Here's Why You Should Retain DaVita (DVA) in Your Portfolio Now

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DaVita Inc. (DVA - Free Report) is gaining on its Kidney Care segment and overseas growth. However, foreign exchange headwinds have been offsetting the positives to some extent.

The company, with a market capitalization of $11.17 billion, is a leading provider of dialysis services to the healthcare industry. The company’s earnings are expected to improve 16.1% over the next year. Also, this Zacks Rank #3 (Hold) company has a trailing four-quarter earnings surprise of 21.9%, on average.

Over the past six months, the stock has gained 16.5% compared with 8% growth of the industry.

Let’s delve deeper into the factors working in favor of the company.

DaVita Kidney Care: DaVita Kidney Care, the company’s major revenue-generating segment, specializes in a broad array of dialysis services, thereby significantly contributing to the topline.

DaVita Kidney Care focuses on setting worldwide standards for clinical, social and operational practices in kidney care. In May 2020, DaVita launched the DaVita Venture Group (“DVG”), through which it plans to accelerate efforts to develop and deploy solutions aimed at improving the health care and quality of life for patients with kidney disease and related chronic conditions. DaVita Kidney Care also provides support to nephrologist-led organizations like Nephrology Care Alliance (NCA) in their endeavor to treat patients with chronic kidney disease.

The growth in the ESRD Medicare Advantage customer base through the fourth quarter has paved the way for the company to invest further and build additional momentum toward value-based care.

Acquisition of Dialysis Centers: Acquiring dialysis centers and businesses that own and operate dialysis centers as well as other ancillary services is DaVita’s preferred business strategy. This has helped boost the company’s top line to a large extent.

During the fourth quarter, DaVita opened a total of 14 dialysis centers in the United States. The company also acquired 30 dialysis centers outside the United States, including the United Kingdom, during the fourth quarter of 2020.

Downside

Foreign Exchange Headwinds: DaVita gains a significant part of its revenues from overseas operations and the acquisition of dialysis centers abroad. However, a strengthening U.S. dollar is likely to affect the company’s international sales. In the fourth quarter of 2020, DaVita saw continued core profit trends in its international business, which was offset by a $6-million foreign exchange loss.

Estimates Trend

The Zacks Consensus Estimate for 2021 revenues is pegged at $11.51 billion, suggesting a 0.3% fall from the year-ago reported number. The consensus mark for 2021 earnings per share is pegged at $8.24, indicating growth of 13.5% from the year-ago reported number.

Stocks to Consider

Some better-ranked stocks from the broader medical space are Align Technology (ALGN - Free Report) , Abbott Laboratories (ABT - Free Report) and Hologic (HOLX - Free Report) . While Align Technology currently sports a Zacks Rank #1 (Strong Buy), the other two are presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology has a projected long-term earnings growth rate of 19%.

Abbott has a projected long-term earnings growth rate of 14.1%.

Hologic has an estimated long-term earnings growth rate of 15.4%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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