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DaVita (DVA) Beats on Q2 Earnings, Raises 2021 EPS View

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Davita Inc. (DVA - Free Report) delivered earnings per share (EPS) of $2.64 in the second quarter of 2021, improving 62.9% year over year. The figure surpassed the Zacks Consensus Estimate by 23.4%.

Revenues in Detail

Revenues of $2.92 billion in the second quarter were up 1.3% year over year. The figure surpassed the Zacks Consensus Estimate by 1.4%.

The top line was driven by favorable changes in government mix and rate (including increases owing to shifts to Medicare Advantage plans), and normal seasonal improvements, led by patients meeting their co-insurance and deductibles. However, this year-over-year uptick was partially offset by a fall in hospital inpatient dialysis revenues.

Segment Details

The company’s dialysis patient service revenues were $2.82 billion, up 2.2% year over year. Other revenues were $98.6 million, down 19.1% from the year-ago quarter’s figure.

Per management, total U.S. dialysis treatments for the second quarter were 7,413,497 or 95,045 treatments per day, on average. This represents a per-day decrease of 2.1% on a year-over-year basis.

As of Jun 30, 2021, DaVita provided dialysis services to around 242,300 patients at 3,159 outpatient dialysis centers, of which 2,828 centers were located in the United States and 331 across 10 countries outside the United States.

During the second quarter of 2021, the company acquired one dialysis center, opened a total of 13 dialysis centers and closed 13 in the United States. It also acquired five dialysis centers and opened three outside the United States in the same period.

DaVita Inc. Price, Consensus and EPS Surprise

DaVita Inc. Price, Consensus and EPS Surprise

DaVita Inc. price-consensus-eps-surprise-chart | DaVita Inc. Quote

Margin Details

In the quarter under review, DaVita’s gross profit rose 6.2% to $951.2 million. Gross margin expanded 152 basis points (bps) to 32.6%.

General & administrative expenses fell 5.7% to $298.1 million.

Adjusted operating profit totaled $653.1 million, reflecting a 12.8% uptick from the prior-year quarter’s level. Adjusted operating margin in the second quarter expanded 228 bps to 22.4%.

Financial Position

DaVita exited the second quarter of 2021 with cash and cash equivalents, and short-term investments of $1.08 billion compared with $895.3 million at the end of the first quarter. Total debt (including current portion) at the end of the second quarter of 2021 was $8.98 billion compared with $8.99 billion at the end of first quarter.

Cumulative net cash flow from operating activities at the end of the second quarter was $834 million compared with $1.01 billion a year ago.

DaVita repurchased 2,069,854 shares of its common stock for $241 million during the reported quarter. Management also confirmed that between Jun 30 and Aug 2, the company repurchased 889,594 shares of its common stock for $107 million.

2021 Guidance

On the back of its performance to date, DaVita raised its financial outlook for the full -year.

Adjusted EPS is projected within $8.80-$9.40, up from the previous guidance of $8.20-$9. The Zacks Consensus Estimate for the same currently stands at $8.90.

Our Take

DaVita ended the second quarter with better-than-expected results. The company registered strong dialysis patient service revenues during the period, which is impressive. The acquisition of several dialysis centers both within the United States and overseas is encouraging as well. Expansion of both margins also bodes well for the stock. A solid EPS guidance for 2021 is another positive.

However, fall in the company’s Other revenues during the second quarter is concerning. Per-day decrease in total U.S. dialysis treatments is also discouraging. Foreign exchange headwinds and stiff competition continue to weigh on the company.

Zacks Rank and Key Picks

DaVita currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced their quarterly results are Encompass Health Corporation (EHC - Free Report) , West Pharmaceutical Services, Inc. (WST - Free Report) and Chemed Corporation (CHE - Free Report) .

Encompass Health, currently carrying a Zacks Rank #2 (Buy), reported second-quarter 2021 adjusted EPS of $1.17, which beat the Zacks Consensus Estimate by 15.8%. Second-quarter revenues of $1.3 billion outpaced the consensus mark by 1.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

West Pharmaceutical reported second-quarter 2021 adjusted EPS of $2.46, which surpassed the Zacks Consensus Estimate by 41.4%. Second-quarter revenues of $723.6 million outpaced the Zacks Consensus Estimate by 8.7%. It currently sports a Zacks Rank #1.

Chemed reported second-quarter 2021 adjusted EPS of $4.60, surpassing the Zacks Consensus Estimate by 3.4%. Revenues of $532.3 million surpassed the Zacks Consensus Estimate by 0.8%. It currently carries a Zacks Rank of 2.