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Why Is DaVita HealthCare (DVA) Down 9.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for DaVita HealthCare (DVA - Free Report) . Shares have lost about 9.9% 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 Earnings Miss Estimates in Q1, View Intact

DaVita reported first-quarter 2019 adjusted earnings per share of 91 cents, missing the Zacks Consensus Estimate of 95 cents. However, the figure declined 13.3% on a year-over-year basis.

Total revenues in the quarter declined 2.8% year over year to $2.74 billion, missing the Zacks Consensus Estimate of $2.82 billion.

First-quarter adjusted operating income totaled $382 million, down 7.1% year over year.

Segment Details

DaVita reports through two main segments — Net dialysis and related lab patient service revenues and Other revenues.

Net dialysis and related lab patient service revenues in the first quarter totaled $2.63 billion, up 0.5% on a year-over-year basis. Other revenues were $113.4 million, significantly down from the year-ago quarter’s $232.8 million.

Per management, total U.S. dialysis treatments for the first quarter was 7,297,460, or 95,267 treatments per day, representing a day’s increase of 2.9% over first-quarter 2018.

Moreover, the company provided dialysis services at 2,932 outpatient dialysis centers, of which 2,689 centers were located in the United States and 243 centers in nine countries outside the United States.

U.S. dialysis and related lab services revenues grossed $2.55 billion, down 3.3% from the prior-year quarter. International dialysis patient service and other revenues totaled $120 million, up 3.2% year over year.

For investors’ notice, the company is on track to divest its major segment — DaVita Medical Group (DMG) — to Optum, a subsidiary of UnitedHealth Group Inc. Notably, the purchase price has been reduced to $4.3 billion from $4.9 billion. This transaction is subject to regulatory approvals and other customary closing conditions. The operations of DMG business have been reported as discontinued.

Financial Condition

DaVita exited the first quarter with operating cash flow of $141 million.

Guidance

For 2019, DaVita continues to expect operating income at the band of $1.54 billion to $1.64 billion.

Operating cash flow for the year is projected between $1.38 billion and $1.58 billion.

Effective income tax rate on income from continuing operations attributable to the company is projected between 28.5% and 29.5% for 2019.

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 -7.09% due to these changes.

VGM Scores

Currently, DaVita HealthCare has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. 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 C. 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. Notably, 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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