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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, courtesy of strength in its DaVita Kidney Care. The optimism led by a solid fourth-quarter 2022 performance, along with the acquisition of dialysis centers, is expected to contribute further. However, concerns regarding the dependence on commercial payers and integration risks persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 30.5% compared with the 20.1% decline of the industry and an 11.9% fall of the S&P 500.
The renowned global comprehensive kidney care provider has a market capitalization of $7.18 billion. The company projects 8.4% growth for the next five years and expects to maintain its strong performance. DaVita’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in the other two, the average surprise being 2.5%.
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, significantly contributing to the company's top line. With respect to DaVita’s Integrated Kidney Care, as of Dec 31, 2022, the company had approximately 42,000 patients in risk-based integrated care arrangements, representing $3.5 billion in annualized medical spend. DaVita also had an additional 15,000 patients in other integrated care arrangements.
Acquisition of Dialysis Centers: Acquiring dialysis centers and businesses, which 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 Dec 31, 2022, DaVita provided dialysis services at 3,074 outpatient dialysis centers, of which 2,724 were U.S. centers, while 350 were located across 11 other countries. In the fourth quarter of 2022, the company opened six dialysis centers in the United States. It also acquired three and opened three dialysis centers outside the United States in the same period.
Strong Q4 Results: DaVita’s solid fourth-quarter 2022 results buoy optimism. The company registered an uptick in its Other revenues during the period. The acquisition of several dialysis centers and the opening of others, within the United States and overseas, were also recorded.
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.
Integration Risks: DaVita’s business strategy includes growth through acquisitions of dialysis centers and other businesses, as well as entry into joint ventures. The company may engage in acquisitions, mergers, joint ventures or dispositions or expand into new business models, which may affect its operations.
Estimate Trend
DaVita is witnessing a negative estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 8.2% south to $5.93.
The Zacks Consensus Estimate for the company’s first-quarter 2023 revenues is pegged at $2.83 billion, suggesting a 0.4% uptick from the year-ago quarter’s reported number.
This compares to our first-quarter revenue estimate of $2.83 billion, which is in line with the Zacks Consensus Estimate.
Key Picks
Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Avanos Medical, Inc. (AVNS - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
Hologic has gained 4.6% against the industry’s 17.4% decline in the past year.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.
Henry Schein has lost 10.3% compared with the industry’s 7.5% decline over the past year.
Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 17.1% compared with the industry’s 17.4% decline 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, courtesy of strength in its DaVita Kidney Care. The optimism led by a solid fourth-quarter 2022 performance, along with the acquisition of dialysis centers, is expected to contribute further. However, concerns regarding the dependence on commercial payers and integration risks persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 30.5% compared with the 20.1% decline of the industry and an 11.9% fall of the S&P 500.
The renowned global comprehensive kidney care provider has a market capitalization of $7.18 billion. The company projects 8.4% growth for the next five years and expects to maintain its strong performance. DaVita’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed the same in the other two, the average surprise being 2.5%.
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, significantly contributing to the company's top line. With respect to DaVita’s Integrated Kidney Care, as of Dec 31, 2022, the company had approximately 42,000 patients in risk-based integrated care arrangements, representing $3.5 billion in annualized medical spend. DaVita also had an additional 15,000 patients in other integrated care arrangements.
Acquisition of Dialysis Centers: Acquiring dialysis centers and businesses, which 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 Dec 31, 2022, DaVita provided dialysis services at 3,074 outpatient dialysis centers, of which 2,724 were U.S. centers, while 350 were located across 11 other countries. In the fourth quarter of 2022, the company opened six dialysis centers in the United States. It also acquired three and opened three dialysis centers outside the United States in the same period.
Strong Q4 Results: DaVita’s solid fourth-quarter 2022 results buoy optimism. The company registered an uptick in its Other revenues during the period. The acquisition of several dialysis centers and the opening of others, within the United States and overseas, were also recorded.
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.
Integration Risks: DaVita’s business strategy includes growth through acquisitions of dialysis centers and other businesses, as well as entry into joint ventures. The company may engage in acquisitions, mergers, joint ventures or dispositions or expand into new business models, which may affect its operations.
Estimate Trend
DaVita is witnessing a negative estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 8.2% south to $5.93.
The Zacks Consensus Estimate for the company’s first-quarter 2023 revenues is pegged at $2.83 billion, suggesting a 0.4% uptick from the year-ago quarter’s reported number.
This compares to our first-quarter revenue estimate of $2.83 billion, which is in line with the Zacks Consensus Estimate.
Key Picks
Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Avanos Medical, Inc. (AVNS - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 4.6% against the industry’s 17.4% decline in the past year.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.
Henry Schein has lost 10.3% compared with the industry’s 7.5% decline over the past year.
Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 17.1% compared with the industry’s 17.4% decline over the past year.