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DaVita (DVA) Misses on Q1 Earnings, Reiterates FY22 EPS View

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DaVita Inc. (DVA - Free Report) delivered adjusted earnings per share (“EPS”) of $1.61 in the first quarter of 2022, down 22.9% year over year. The figure missed the Zacks Consensus Estimate by 12.9%.

GAAP EPS for the quarter was also $1.61, reflecting a 22.9% plunge from the year-earlier figure.

Revenues in Detail

Revenues of $2.82 billion in the first quarter were marginally down by 0.1% year over year. The figure missed the Zacks Consensus Estimate by 2.1%.

Management noted that the top line was impacted by a seasonal decline from co-insurance and deductibles. However, this was partially offset by an increase in the Medicare base rate in 2022, increases in commercial rate and mix, favorable changes due to the continued shift to Medicare Advantage plans, and a seasonal uptick from hospital inpatient dialysis treatments. Management also estimates that incremental mortality due to the Omicron variant was around 2,100 compared with approximately 1,100 during the sequentially last-reported quarter.

Segment Details

The company’s dialysis patient service revenues were $2.72 billion, up by a marginal 0.1% year over year. Other revenues were $101.3 million, down 3.9% from the year-ago quarter’s figure.

Per management, total U.S. dialysis treatments for the first quarter were 7,109,788 or 92,335 per day, on average. This represents a per-day decrease of 2.4% on a year-over-year basis.

As of Mar 31, 2022, DaVita provided dialysis services to around 241,800 patients at 3,155 outpatient dialysis centers, of which 2,809 are U.S. centers while 346 are located across 11 other countries.

During the first quarter of 2022, the company opened nine dialysis centers and closed 15 in the United States. It also acquired three and opened four dialysis centers 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 fell 9.4% to $799 million. Gross margin contracted 291 basis points (bps) to 28.4%.

General & administrative expenses climbed 4.8% to $294.8 million.

Adjusted operating profit totaled $504.2 million, reflecting a 15.9% plunge from the prior-year quarter’s level. Adjusted operating margin in the first quarter contracted 339 bps to 17.9%.

Financial Position

DaVita exited first-quarter 2022 with cash and cash equivalents, and short-term investments of $346.9 million compared with $484.2 million at the end of 2021. Total debt (including current portion) at the end of first-quarter 2022 was $8.87 billion compared with $8.91 billion at the end of 2021.

Net cash flow from operating activities at the end of first-quarter 2022 was $322.2 million compared with $154.3 million a year ago.

DaVita repurchased 2.1 million shares of its common stock for $233 million during the reported quarter. Management also informed that from Mar 31, 2022 to May 4, 2022, the company repurchased 0.8 million shares of its common stock for $88 million.

2022 Guidance

DaVita has reiterated its financial outlook for full-year 2022.

Adjusted EPS for the full year is still projected in the range of $7.50-$8.50. The Zacks Consensus Estimate for the same currently stands at $8.13.

Our Take

DaVita ended the first quarter of 2021 with lower-than-expected results. Dismal overall top- and bottom-line results are disappointing. A fall in the company’s Other revenues during the first quarter is concerning. Per-day decrease in total U.S. dialysis treatments is also discouraging. Contraction of both margins also does not bode well for the company. Foreign exchange headwinds and stiff competition continue to weigh on DVA.

However, the company registered improvement in dialysis patient service revenues during the period, which is impressive. The acquisition of several dialysis centers and opening of others, both within the United States and overseas, are encouraging as well.

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 quarterly results are Omnicell, Inc. (OMCL - Free Report) , UnitedHealth Group Incorporated (UNH - Free Report) and Alkermes plc (ALKS - Free Report) .

Omnicell, carrying a Zacks Rank #2 (Buy), reported first-quarter 2022 adjusted EPS of 83 cents, which beat the Zacks Consensus Estimate by 16.9%. Revenues of $318.8 million outpaced the consensus mark by 0.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Omnicell has an estimated long-term growth rate of 16%. OMCL’s earnings surpassed estimates in three of the trailing four quarters, the average surprise being 13.4%.

UnitedHealth, having a Zacks Rank #2, reported first-quarter 2022 adjusted EPS of $5.49, which beat the Zacks Consensus Estimate by 1.7%. Revenues of $80.1 billion outpaced the consensus mark by 1.9%.

UnitedHealth has an estimated long-term growth rate of 14.8%. UNH’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.7%.

Alkermes reported first-quarter 2022 adjusted EPS of 12 cents, which surpassed the Zacks Consensus Estimate of a penny. Revenues of $278.6 million outpaced the Zacks Consensus Estimate by 6.2%. It currently carries a Zacks Rank #2.

Alkermes has an estimated long-term growth rate of 25.1%. ALKS’ earnings surpassed estimates in the trailing four quarters, the average surprise being 350.5%.

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