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DaVita HealthCare (DVA) Down 10.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for DaVita HealthCare (DVA - Free Report) . Shares have lost about 10.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is DaVita HealthCare due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

DaVita reported second-quarter 2018 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.

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.

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%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -13.2% due to these changes.

VGM Scores

Currently, DaVita HealthCare has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, DaVita HealthCare has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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