Investors might want to bet on DaVita HealthCare (DVA), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this kidney dialysis provider, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for DaVita HealthCare, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $1.38 per share for the current quarter, which represents a year-over-year change of +51.65%.
Over the last 30 days, two estimates have moved higher for DaVita HealthCare compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 8.21%.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $5.83 per share, representing a year-over-year change of +7.96%.
In terms of estimate revisions, the trend for the current year also appears quite encouraging for DaVita HealthCare. Over the past month, four estimates have moved higher compared to no negative revisions, helping the consensus estimate increase 9.3%.
Favorable Zacks Rank
The promising estimate revisions have helped DaVita HealthCare earn a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Investors have been betting on DaVita HealthCare because of its solid estimate revisions, as evident from the stock's 13.8% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.