DaVita HealthCare (DVA) Down 12.2% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for DaVita HealthCare (DVA). Shares have lost about 12.2% in that time frame, outperforming 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 Beat Estimates in Q4, Guidance Impressive

DaVita reported fourth-quarter 2019 adjusted EPS of $1.86, beating the Zacks Consensus Estimate of $1.66. The bottom line indicates a massive surge from the year-ago quarter’s 90 cents.

Total revenues in the quarter moved up 2.7% year over year to $2.90 billion, which also lagged the Zacks Consensus Estimate of $2.92 billion.

Fourth-quarter adjusted operating income totaled $463 million, up 25.1% year over year.

Segment Details

Net dialysis and related lab patient service revenues in the fourth quarter totaled $2.77 billion, up 1.8% on a year-over-year basis. Other revenues were $132,575, up 26.2% from the year-ago quarter’s figure.

Per management, total U.S. dialysis treatments for the fourth quarter were 7,681,462, or an average of 96,744 treatments per day. The figure represents a per-day increase of 1.7% on a year-over-year basis.

Per management, DaVita witnessed lower calcimimetics revenue in the quarter, which impacted its annual sales.

Also, the company provided dialysis services to a total of approximately 235,500 patients at 3,012 outpatient dialysis centers, of which 2,753 centers were located in the United States and 259 centers were in 10 countries outside the United States. During the quarter, DaVita opened a total of 31 new dialysis centers in the country. Outside the United States, the company launched three new dialysis centers and acquired seven dialysis centers.

Financial Condition

DaVita exited the fourth quarter with operating cash flow of $678 million.

Guidance

DaVita expects 2020 revenues between $11.50 billion and $11.70 billion.
Adjusted EPS is projected between $5.75 and $6.25. This compares to the earlier projected band of $5.25-$5.75.

Operating income margin is estimated in the band of 13-14%.

Free cash flow from continuing operations is projected between $600 million and $800 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 15.61% due to these changes.

VGM Scores

Currently, DaVita HealthCare has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise DaVita HealthCare has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.