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3 Reasons to Retain DaVita (DVA) Stock in Your Portfolio
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DaVita Inc. (DVA - Free Report) is well poised for growth in the coming quarters, backed by strength in its DaVita Kidney Care. A robust first-quarter 2022 performance, along with the acquisition of dialysis centers, is expected to contribute further. However, concerns regarding stiff competition and dependence on commercial payers persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 27.8% compared with 37.1% fall of the industry and the 18.7% decline of the S&P 500.
The renowned global comprehensive kidney care provider has a market capitalization of $8.04 billion. The company projects 10.6% growth for the next five years and expects to maintain its strong performance. DaVita’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in the other, the average surprise being 7.4%.
Image Source: Zacks Investment Research
Let’s delve deeper.
DaVita Kidney Care: We are optimistic about DaVita Kidney Care, the major revenue-generating segment of DVA. It specializes in a broad array of dialysis services, thereby significantly contributing to the company's top line. With respect to DaVita Integrated Kidney Care, the company had approximately 40,000 patients in risk-based integrated care arrangements, representing approximately $3.3 billion in annualized medical spending as of Mar 31, 2022. DaVita had an additional 8,000 patients in other integrated care arrangements.
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. These strategies have boosted the company’s top line to a large extent, raising our optimism.
As of Mar 31, 2022, DaVita had provided dialysis services to around 241,800 patients at 3,155 outpatient dialysis centers worldwide. In December 2021, DaVita acquired transplant software company, MedSleuth.
Strong Q1 Results: DaVita’s solid first-quarter 2022 results buoy optimism. The company registered an improvement in dialysis patient service revenues during the first quarter of 2022. The acquisition of several dialysis centers and the opening of others, both within the United States and overseas, are promising. DaVita’s partnership with various nephrologists is also encouraging. DaVita has been steadily expanding its foothold in international markets, thereby recording strong performances.
Downsides
Dependence on Commercial Payers: A significant portion of DaVita’s dialysis and related lab services’ revenues are generated from patients who have commercial payers as the primary payers. The payments received from commercial payers are the primary generators of profit. However, there remains a risk of people shifting from commercial insurance schemes to government schemes due to the wide disparity in payment rates in case of a rise in unemployment.
Stiff Competition: DaVita, in its U.S. dialysis business, faces intense competition from large and medium-sized providers, among others. U.S. regulations require medical directors for each center. As the company and its competitors continue to grow and open new dialysis centers, DaVita may not be able to retain an adequate number of nephrologists to serve as medical directors.
Estimate Trend
DaVita is witnessing a negative estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 3.6% south to $7.80.
The Zacks Consensus Estimate for the company’s second-quarter 2022 revenues is pegged at $2.93 billion, suggesting a 0.6% improvement from the year-ago quarter’s reported number.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.6%.
AMN Healthcare has gained 23.8% against the industry’s 32.9% fall in the past year.
Patterson Companies, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 9.6%. PDCO’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%.
Patterson Companies has gained 1.2% against the industry’s 11.9% fall over the past year.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 9.5%. MCK’s earnings surpassed estimates in three of the trailing four quarters, the average beat being 19.5%.
McKesson has gained 69.1% against the industry’s 11.9% fall over the past year.
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3 Reasons to Retain DaVita (DVA) Stock in Your Portfolio
DaVita Inc. (DVA - Free Report) is well poised for growth in the coming quarters, backed by strength in its DaVita Kidney Care. A robust first-quarter 2022 performance, along with the acquisition of dialysis centers, is expected to contribute further. However, concerns regarding stiff competition and dependence on commercial payers persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 27.8% compared with 37.1% fall of the industry and the 18.7% decline of the S&P 500.
The renowned global comprehensive kidney care provider has a market capitalization of $8.04 billion. The company projects 10.6% growth for the next five years and expects to maintain its strong performance. DaVita’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed the same in the other, the average surprise being 7.4%.
Image Source: Zacks Investment Research
Let’s delve deeper.
DaVita Kidney Care: We are optimistic about DaVita Kidney Care, the major revenue-generating segment of DVA. It specializes in a broad array of dialysis services, thereby significantly contributing to the company's top line. With respect to DaVita Integrated Kidney Care, the company had approximately 40,000 patients in risk-based integrated care arrangements, representing approximately $3.3 billion in annualized medical spending as of Mar 31, 2022. DaVita had an additional 8,000 patients in other integrated care arrangements.
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. These strategies have boosted the company’s top line to a large extent, raising our optimism.
As of Mar 31, 2022, DaVita had provided dialysis services to around 241,800 patients at 3,155 outpatient dialysis centers worldwide. In December 2021, DaVita acquired transplant software company, MedSleuth.
Strong Q1 Results: DaVita’s solid first-quarter 2022 results buoy optimism. The company registered an improvement in dialysis patient service revenues during the first quarter of 2022. The acquisition of several dialysis centers and the opening of others, both within the United States and overseas, are promising. DaVita’s partnership with various nephrologists is also encouraging. DaVita has been steadily expanding its foothold in international markets, thereby recording strong performances.
Downsides
Dependence on Commercial Payers: A significant portion of DaVita’s dialysis and related lab services’ revenues are generated from patients who have commercial payers as the primary payers. The payments received from commercial payers are the primary generators of profit. However, there remains a risk of people shifting from commercial insurance schemes to government schemes due to the wide disparity in payment rates in case of a rise in unemployment.
Stiff Competition: DaVita, in its U.S. dialysis business, faces intense competition from large and medium-sized providers, among others. U.S. regulations require medical directors for each center. As the company and its competitors continue to grow and open new dialysis centers, DaVita may not be able to retain an adequate number of nephrologists to serve as medical directors.
Estimate Trend
DaVita is witnessing a negative estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 3.6% south to $7.80.
The Zacks Consensus Estimate for the company’s second-quarter 2022 revenues is pegged at $2.93 billion, suggesting a 0.6% improvement from the year-ago quarter’s reported number.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Patterson Companies, Inc. (PDCO - Free Report) and McKesson Corporation (MCK - Free Report) .
AMN Healthcare, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 1.1%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 15.6%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
AMN Healthcare has gained 23.8% against the industry’s 32.9% fall in the past year.
Patterson Companies, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 9.6%. PDCO’s earnings surpassed estimates in all the trailing four quarters, the average beat being 16.5%.
Patterson Companies has gained 1.2% against the industry’s 11.9% fall over the past year.
McKesson, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 9.5%. MCK’s earnings surpassed estimates in three of the trailing four quarters, the average beat being 19.5%.
McKesson has gained 69.1% against the industry’s 11.9% fall over the past year.