It has been about a month since the last earnings report for DaVita Inc. (NYSE:DVA) . Shares have added about 5.6% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is DVA due for a pullback? 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 drivers.
Recent Earnings
DaVita reported first-quarter 2018 adjusted operating earnings of $1.05 per share, beating the Zacks Consensus Estimate of 92 cents. Earnings increased 32.9% on a year-over-year basis.
Total revenues increased 8.3% year over year to $2.85 billion but missed the Zacks Consensus Estimate of $2.96 billion.
Business Details
Net dialysis and related lab patient service revenues in the first quarter were $2.62 billion, up 13% year over year. Other revenues were $232 million, down 26.2% on a year-over-year basis.
DaVita saw impressive results from the Kidney Care business. Net consolidated revenues in the segment were $2.85 billion, up 8.3% year over year. Adjusted Kidney Care operating income was $411 million, up 8.2% year over year. As an operating division of DaVita, 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 operating income in the first quarter was up 4.4% to $433.4 million. U.S. dialysis treatments for the first quarter of 2018 were 7,174,026, or 92,568 treatments per day. This represents an increase of 4.8% year over year.
The company’s patient care costs were up approximately 25 cents per treatment compared with the last reported quarter.
For investors’ notice, the company’s major segment — DaVita Medical Group (“DMG”) — is on track for divestment to Optum, a subsidiary of UnitedHealth Group Inc (NYSE:UNH). This transaction is subject to regulatory approvals and other customary closing conditions. The results of DMG business’ operations have been reported as discontinued in the quarter under review.
Share Repurchase Update
During the first quarter, DaVita repurchased a total of 4.2 million shares for approximately $298 million at an average price of $71.09 per share.
Through May 2, 2018, DaVita has repurchased 8.5 million shares for $574 million on a year-to-date basis. This represents nearly 5% of the company’s total shares outstanding. This also includes approximately $500 million of stock repurchase.
Guidance
DaVita reiterated guidance for 2018.
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. Effective tax rate is expected in the range 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. There has been one revision higher for the current quarter compared to three lower.
DaVita Inc. Price and Consensus
VGM Scores
At this time, DVA has a nice Growth Score of B, a grade with the same score on the momentum front. The stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, DVA has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
DaVita Inc. (DVA): Free Stock Analysis Report
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