It has been about a month since the last earnings report for DaVita HealthCare Partners Inc. (DVA - Free Report) . Shares have added about 4.8% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to their next earnings release, or is the stock due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
DaVita Earnings Beat Estimates, Revenues Lag in Q4
DaVita reported fourth-quarter 2016 adjusted operating earnings of 98 cents per share that surpassed the Zacks Consensus Estimate of 91 cents. However, earnings declined from $1.01 in the year-ago quarter.
Total revenue increased 5.2% year over year to approximately $3.72 billion but missed the Zacks Consensus Estimate of $3.74 billion. The year-over-year improvement was mainly attributable to a rise in patient service revenues, partially offset by a decrease in capitated revenues and other revenues from the year-ago quarter.Segment Update
Dialysis and Related Lab Services
Total operating revenue during the fourth quarter was approximately $2.3 billion, up 4.8% year over year. However, operating income was down 6.0% year over year to $436 million.
Davita Medical Group (“DMG”)
Total operating revenue during the fourth quarter was $1 billion, up 10.1% year over year. However, the segment’s adjusted operating income plunged nearly 12% from $25 million in the prior-year quarter to of $22 million.
Total cash and cash equivalents of DaVita declined 13.3% to $913 million as of Dec 31, 2016 from $1.5 billion as of Dec 31, 2015.
Cash generated from operations in 2016 was $1.96 billion compared with $1.56 billion in 2015.
As of Dec 31, 2016, DaVita’s long-term debt was $8.9 billion, down 1.1% from year-end 2015.
Share Repurchase Update
DaVita bought back 6.7 million shares in the reported quarter for $416 million, or an average price of $61.96 per share. As of Dec 31, 2016 the company had a total of approximately $677 million in outstanding board repurchase authorizations.
Management projected DaVita’s consolidated operating income for 2017 in the range of $1.635–$1.775 billion. The company expects operating income of $1.525–$1.625 billion for Kidney Care. Operating income for DMG is now anticipated in the range of $110–$150 million. Operating cash flow projection for 2017 is expected at $1.750–$1.950 billion.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been five upward revisions for the current quarter.
At this time, DaVita's stock has an average Growth Score of 'C', a grade with the same score on the momentum front. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and growth.
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.