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In the last reported quarter, the company’s earnings per share (EPS) of $2.24 beat the Zacks Consensus Estimate by 1.4%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on three occasions and missed once, delivering an earnings surprise of 5.4%, on average. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Let’s check out the factors that have shaped DVA’s performance prior to this announcement.
Factors Likely to Aid DaVita
On fourth-quarter 2024 earnings call in February, DaVita’s management confirmed that within U.S. dialysis, the company continued to benefit from innovation in its revenue cycle operations. Per management, enhanced collection performance and contracting propelled higher revenue per treatment growth during the quarter, which helped in offsetting the slower-than-expected rebound in treatment volume. We expect DVA to have continued to benefit from strength in revenue cycle operations during the first quarter of 2025, thereby driving up revenues.
On the same call, management confirmed the closing of three of the four acquisitions in Latin America announced last year, with Brazil expected to close mid-2025. DaVita also continued to make progress in delivering sustainable, integrated care through the Integrated Kidney Care business. These look promising for the stock.
However, DaVita continued to witness elevated mortality and mistreatment rates, while new patient starts were negatively impacted by supply constraints of its peritoneal dialysis (PD) solutions during the fourth quarter of 2024. Management also stated that DVA’s inability to start new patients on PD, resulting from the temporary closure of Baxter's North Cove facility due to Hurricane Helene and the related impact on home dialysis, contributed to lower new admits in the fourth quarter. Management expects this to negatively impact volume growth in 2025. These factors are likely to have continued to weigh on the to-be-reported quarter’s performance, raising our apprehension.
DVA’s Estimate Picture
For first-quarter 2025, the Zacks Consensus Estimate for revenues is pegged at $3.21 billion, implying an improvement of 4.6% from the prior-year quarter’s reported figure.
The consensus estimate for EPS is pegged at $1.75, indicating a decline of 26.5% from the prior-year period’s reported number.
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. This is not the case here, as you can see below.
Earnings ESP: DaVita has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Over the past three months, DaVita’s shares have lost 17%, underperforming Medical - Outpatient and Home Healthcare’s 2.5% decline. DVA’s shares also underperformed the Zacks Medical sector and the S&P 500’s decreases of 9.5% and 7.8%, respectively.
Three Months Price Comparison
Image Source: Zacks Investment Research
DaVita’s peers like Aveanna Healthcare Holdings Inc. (AVAH - Free Report) , RadNet, Inc. (RDNT - Free Report) and Amedisys, Inc. (AMED - Free Report) have all outperformed the company. AVAH, RDNT and AMED’s shares are up 1.3%, down 11.8% and up 4.5%, respectively, in the same time frame.
DaVita’s Key Valuation Metric
From a valuation standpoint, DVA’s forward 12-month price-to-sales (P/S) is 0.8X, a discount to the industry's average of 2.8X.
Image Source: Zacks Investment Research
The company is trading at a discount to its peers, RadNet and Amedisys. However, DaVita is trading at a premium to its other peer, Aveanna Healthcare. RadNet and Amedisys’ P/S currently stand at 2.1X and 1.3X, respectively, while the ratio for Aveanna Healthcare stands at 0.4X.
This suggests that investors may be paying a lower price relative to the company's expected sales growth.
DVA’s Long-Term Investment Visibility
On fourth-quarter 2024 earnings call, DaVita’s management also shared an update regarding oral drugs transitioning from Medicare drug benefit to the dialysis benefit, effective Jan. 1, 2025. The company is expanding access for patients and options for prescribers. Per DVA’s estimates, up to 20% of patients did not have coverage and are now eligible to receive this therapy. The company’s patients will have support from dieticians and access to all major classes of phosphate binders, including both branded and generic options. This is likely to drive DaVita’s revenues over the long term.
DaVita expects to close the purchase agreements with Fresenius Medical Care to acquire their dialysis service operations in Brazil in mid-2025. Once fully operational, this acquisition is likely to generate additional revenues for the company.
In June 2024, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to update the Medicare end-stage renal disease (ESRD) Prospective Payment System payment rate and policies for the calendar year 2025. If the proposed rule gets finalized, it will allow Medicare payment for dialysis in the home setting for beneficiaries with acute kidney injury and update requirements for the ESRD Quality Incentive Program. CMS estimates that the overall impact of the proposed rule will increase ESRD freestanding facilities’ average reimbursement by 2.1% in 2025. This is likely to aid DVA in expanding its patient coverage, thereby generating additional revenues.
However, management’s expectations that its inability to start new patients on PD, leading to lower new admits in fourth-quarter 2024 and the related negative impact of volume growth in 2025 raise our apprehension.
Our Final Take on DaVita
There is no denying that DaVita sits favorably in terms of core business strength, earnings prowess, robust financial footing and global opportunities. The stock’s strong core growth prospects are a good reason for existing investors to retain shares for potential future gains.
For those exploring to make new additions to their portfolios, the valuation indicates expectations of superior performance compared with its industry and sector peers. However, as it is still valued lower than the broader market, it suggests potential room for growth if it can align more closely with overall market performance. As the chances of beating estimates are unlikely, it would be unwise to add the stock to one’s portfolio. However, if investors are already holding the stock, it would be prudent to hold on to it at present. The favorable Zacks Style Score with a Growth Score of A suggests continued uptrend potential for DVA.
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Can Revenue Cycle Operations Drive DVA Stock Before Q1 Earnings?
DaVita Inc. (DVA - Free Report) is scheduled to report first-quarter 2025 results on May 12, after the closing bell.
In the last reported quarter, the company’s earnings per share (EPS) of $2.24 beat the Zacks Consensus Estimate by 1.4%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on three occasions and missed once, delivering an earnings surprise of 5.4%, on average. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Let’s check out the factors that have shaped DVA’s performance prior to this announcement.
Factors Likely to Aid DaVita
On fourth-quarter 2024 earnings call in February, DaVita’s management confirmed that within U.S. dialysis, the company continued to benefit from innovation in its revenue cycle operations. Per management, enhanced collection performance and contracting propelled higher revenue per treatment growth during the quarter, which helped in offsetting the slower-than-expected rebound in treatment volume. We expect DVA to have continued to benefit from strength in revenue cycle operations during the first quarter of 2025, thereby driving up revenues.
On the same call, management confirmed the closing of three of the four acquisitions in Latin America announced last year, with Brazil expected to close mid-2025. DaVita also continued to make progress in delivering sustainable, integrated care through the Integrated Kidney Care business. These look promising for the stock.
However, DaVita continued to witness elevated mortality and mistreatment rates, while new patient starts were negatively impacted by supply constraints of its peritoneal dialysis (PD) solutions during the fourth quarter of 2024. Management also stated that DVA’s inability to start new patients on PD, resulting from the temporary closure of Baxter's North Cove facility due to Hurricane Helene and the related impact on home dialysis, contributed to lower new admits in the fourth quarter. Management expects this to negatively impact volume growth in 2025. These factors are likely to have continued to weigh on the to-be-reported quarter’s performance, raising our apprehension.
DVA’s Estimate Picture
For first-quarter 2025, the Zacks Consensus Estimate for revenues is pegged at $3.21 billion, implying an improvement of 4.6% from the prior-year quarter’s reported figure.
The consensus estimate for EPS is pegged at $1.75, indicating a decline of 26.5% from the prior-year period’s reported number.
DaVita Inc. Price and EPS Surprise
DaVita Inc. price-eps-surprise | DaVita Inc. Quote
What Our Model Suggests About DaVita
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. This is not the case here, as you can see below.
Earnings ESP: DaVita has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
DVA’s Share Price Performance
Over the past three months, DaVita’s shares have lost 17%, underperforming Medical - Outpatient and Home Healthcare’s 2.5% decline. DVA’s shares also underperformed the Zacks Medical sector and the S&P 500’s decreases of 9.5% and 7.8%, respectively.
Three Months Price Comparison
Image Source: Zacks Investment Research
DaVita’s peers like Aveanna Healthcare Holdings Inc. (AVAH - Free Report) , RadNet, Inc. (RDNT - Free Report) and Amedisys, Inc. (AMED - Free Report) have all outperformed the company. AVAH, RDNT and AMED’s shares are up 1.3%, down 11.8% and up 4.5%, respectively, in the same time frame.
DaVita’s Key Valuation Metric
From a valuation standpoint, DVA’s forward 12-month price-to-sales (P/S) is 0.8X, a discount to the industry's average of 2.8X.
Image Source: Zacks Investment Research
The company is trading at a discount to its peers, RadNet and Amedisys. However, DaVita is trading at a premium to its other peer, Aveanna Healthcare. RadNet and Amedisys’ P/S currently stand at 2.1X and 1.3X, respectively, while the ratio for Aveanna Healthcare stands at 0.4X.
This suggests that investors may be paying a lower price relative to the company's expected sales growth.
DVA’s Long-Term Investment Visibility
On fourth-quarter 2024 earnings call, DaVita’s management also shared an update regarding oral drugs transitioning from Medicare drug benefit to the dialysis benefit, effective Jan. 1, 2025. The company is expanding access for patients and options for prescribers. Per DVA’s estimates, up to 20% of patients did not have coverage and are now eligible to receive this therapy. The company’s patients will have support from dieticians and access to all major classes of phosphate binders, including both branded and generic options. This is likely to drive DaVita’s revenues over the long term.
DaVita expects to close the purchase agreements with Fresenius Medical Care to acquire their dialysis service operations in Brazil in mid-2025. Once fully operational, this acquisition is likely to generate additional revenues for the company.
In June 2024, the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to update the Medicare end-stage renal disease (ESRD) Prospective Payment System payment rate and policies for the calendar year 2025. If the proposed rule gets finalized, it will allow Medicare payment for dialysis in the home setting for beneficiaries with acute kidney injury and update requirements for the ESRD Quality Incentive Program. CMS estimates that the overall impact of the proposed rule will increase ESRD freestanding facilities’ average reimbursement by 2.1% in 2025. This is likely to aid DVA in expanding its patient coverage, thereby generating additional revenues.
However, management’s expectations that its inability to start new patients on PD, leading to lower new admits in fourth-quarter 2024 and the related negative impact of volume growth in 2025 raise our apprehension.
Our Final Take on DaVita
There is no denying that DaVita sits favorably in terms of core business strength, earnings prowess, robust financial footing and global opportunities. The stock’s strong core growth prospects are a good reason for existing investors to retain shares for potential future gains.
For those exploring to make new additions to their portfolios, the valuation indicates expectations of superior performance compared with its industry and sector peers. However, as it is still valued lower than the broader market, it suggests potential room for growth if it can align more closely with overall market performance. As the chances of beating estimates are unlikely, it would be unwise to add the stock to one’s portfolio. However, if investors are already holding the stock, it would be prudent to hold on to it at present. The favorable Zacks Style Score with a Growth Score of A suggests continued uptrend potential for DVA.