DaVita Inc. (NYSE:DVA) reported third-quarter 2016 adjusted operating earnings of 95 cents per share that surpassed the Zacks Consensus Estimate of 94 cents by 1.2%. However, earnings declined 5% year over year.
/> Including a gain on changes in ownership interest upon the formation of the Asia-Pacific dialysis joint venture, net income attributable to DaVita for the three months ended Sep 30, 2016 was $2.76 per share, up 176% year over year.
Operational Update
Total revenue increased 5.7% year over year to approximately $3.73 billion but missed the Zacks Consensus Estimate of $3.76 billion by 0.8%. The year-over-year improvement was mainly attributable to a rise in patient service revenues and other revenues, partially offset by a decrease in capitated revenues from the year-ago quarter.
Davita has shown an improved control on its expenses in the reported quarter. Total operating expenses and charges dropped 3.5% year over year to $2.91 billion.. This expense reduction was supported by higher equity investment income and an additional gain on changes in ownership interests from the deconsolidation of the Asia-Pacific dialysis businessfollowing an agreement with Khazanah and Mitsui.
Total U.S. dialysis treatments in the third quarter were approximately 6.9 million or 87, 190 treatments per day. This represents a per day increase of 4.2% year over year. DaVita opened 28 new dialysis centers alongside acquiring four and closing three in the U.S. It has also acquired eight and opened four new dialysis centers outside the U.S.
Segment Update
Dialysis and Related Lab Services
Total operating revenue was approximately $2.3 billion, up 5.6% year over year. However, operating income was down 2.2% year over year to $452 million.
Davita Medical Group (“DMG”)
Total operating revenue was $1 billion, up 2.7% year over year. However, the segment’s adjusted operating income plunged nearly 150% from $83 million in the prior-year quarter to of $33 million.
Financial Update
Total cash and cash equivalents of DaVita declined 13.3% to $913 million as of Sep 30, 2016 from $1.5 billion as of Dec 31, 2015.
Cash from operations at the end of first nine months of 2016 grew 32% year over year to $1.5 billion.
As of Sep 30, 2016, DaVita’s long-term debt was $8.9 billion, down 1.1% from year-end 2015.
Share Repurchase Update
DaVita bought back 3.7 million shares in the reported quarter. This led to a total of $656 million spent during the first nine months of 2016 to repurchase 9.9 million shares.
Revised Guidance for 2016
Management projected DaVita’s consolidated operating income in the range of $1.810–$1.870 billion as against the previous range of $1.785–$1.875 billion.
The company also increased the projected range of operating income for Kidney Care to $1.695–$1.725 billion from $1.675–$1.725 billion guided earlier. Operating income for DMG is now anticipated in the range of $115–$145 million as against the earlier projected range of $110–$150 million.
Operating cash flow projection has been raised to the range of $1.750–$1.850 billion from $1.600–$1.750 billion projected earlier.
Zacks Rank and Performance of Other Medical Sector Stocks:
DaVita carries a Zacks Rank #5 (Strong Sell).
Among the other firms in the medical sector that have reported their third-quarter earnings so far, the bottom line at Aetna Inc. (NYSE:AET) , Molina Healthcare Inc (NYSE:MOH) and UnitedHealth Group Inc. (NYSE:UNH) beat their respective Zacks Consensus Estimate.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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