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DaVita (DVA) Beats Earnings and Revenue Estimates in Q2

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DaVita Inc (DVA - Free Report) reported second-quarter 2017 adjusted operating earnings of $1.05 per share, beating the Zacks Consensus Estimate of 97 cents. The figure improved 14.1% on a year-over-year basis.

Total revenues declined 25.5% year over year to $2.89 billion, but beat the Zacks Consensus Estimate of $2.88 billion.

DaVita carries a Zacks Rank #3 (Hold).

Business Details

Net dialysis and related lab patient service revenues in the second quarter were $2.67 billion, up 11.9% year over year. Other revenues were $218 million, down 30.7% on a year-over-year basis.

DaVita witnessed impressive results in the Kidney Care business. Net consolidated revenues in the segment were $2.87 billion, up 7% year over year. Adjusted Kidney Care operating income was $438 million, up 12% year over year. As an operating division of the company, DaVita Kidney Care focuses on setting worldwide standards for clinical, social and operational practices in kidney care.

Adjusted U.S. dialysis and related lab services revenues came in at $2.60 billion, up 11.3% year over year. Operating income in the segment inched down 0.2% to $449 million. U.S. dialysis treatments in the quarter under review were 7,331,590, or 93,995 treatments per day. This represents an increase of 4.2% year over year.

For investors’ notice, the company is on track to divest the major segment — DaVita Medical Group (DMG) — to Optum, a subsidiary of UnitedHealth Group Inc. This transaction is subject to regulatory approvals and other customary closing conditions. The results of DMG business’ operations have been reported as discontinued.

DaVita Inc. Price, Consensus and EPS Surprise

 

Share Repurchase Update

During the second quarter, DaVita repurchased a total of 7.8 million shares for approximately $512 million, at an average price of $65.60 per share.

Through Jul 31, 2018, DaVita has repurchased 15.9 million shares for $1.1 billion on a year-to-date basis.

Guidance

DaVita reiterated guidance for 2018.

The company projects Kidney Care consolidated operating income in the range of $1.5-$1.6 billion. Operating cash flow from continuing operations is estimated in the range of $1.4-$1.6 billion. This guidance implies lower expected operating income in the second half of 2018 compared with the first half.

However, effective tax rate is expected in the range of 28.5-29.5%, up from the previous guidance of 26.5-27.5%.

In Conclusion

DaVita ended the second quarter of 2018 on a favorable note, beating the Zacks Consensus Estimate for both the counts. The company witnessed impressive results from the Kidney Care business. As an operating division of the company, DaVita Kidney Care focuses clinical, social and operational practices worldwide. The company’s efforts to control expenses hold promise. A compelling inorganic growth story is another positive.

On the flip side, sluggishness in the Other business is a major headwind for DaVita. The company is facing the adverse effects of pricing pressure in the U.S. medical industry and rise in Medicare insurance costs. The company’s major segment — DaVita Medical Group — has been on track for the divestment to Optum, a subsidiary of UnitedHealth Group Inc. Further, DaVita’s GranuFlo and DaVita Rx units are grappling with multiple issues. These might have a negative impact on the company’s customer base.

Q2 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season are Stryker Corporation (SYK - Free Report) , Intuitive Surgical, Inc (ISRG - Free Report) and Illumina, Inc (ILMN - Free Report) .

While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Stryker carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.76 per share in the second quarter of 2018, which beat the Zacks Consensus Estimate of $2.48. Adjusted earnings improved 38% year over year.

Stryker reported second-quarter 2018 adjusted earnings per share of $1.76, beating the Zacks Consensus Estimate by 1.7%. Earnings improved 15% year over year and also exceeded the high end of the company’s guidance.

Illumina reported adjusted earnings of $1.43 per share, beating the Zacks Consensus Estimate of $1.11.

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