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DaVita (DVA) Earnings Beat Estimates, Revenues Lag in Q4


DaVita Inc. DVA reported fourth-quarter 2016 adjusted operating earnings of 98 cents per share that surpassed the Zacks Consensus Estimate of 91 cents. However, earnings declined from $1.01 in the year-ago quarter.

Total revenue increased 5.2% year over year to approximately $3.72 billion but missed the Zacks Consensus Estimate of $3.74 billion. The year-over-year improvement was mainly attributable to a rise in patient service revenues, partially offset by a decrease in capitated revenues and other revenues from the year-ago quarter.

Stock Performance

The price performance of the stock has been unfavorable over the last three months. DaVita registered a return of 4.50%, underperforming the Zacks classified Medical – Outpatient and Home Healthcare sub-industry’s gain of almost 6.68%.

Segment Update

Dialysis and Related Lab Services

Total operating revenue during the fourth quarter was approximately $2.3 billion, up 4.8% year over year. However, operating income was down 6.0% year over year to $436 million.

Davita Medical Group (“DMG”)

Total operating revenue during the fourth quarter was $1 billion, up 10.1% year over year. However, the segment’s adjusted operating income plunged nearly 12% from $25 million in the prior-year quarter to of $22 million.

Financial Update

Total cash and cash equivalents of DaVita declined 13.3% to $913 million as of Dec 31, 2016 from $1.5 billion as of Dec 31, 2015.

Cash generated from operations in 2016 was $1.96 billion compared with $1.56 billion in 2015.

As of Dec 31, 2016, DaVita’s long-term debt was $8.9 billion, down 1.1% from year-end 2015.

Share Repurchase Update

DaVita bought back 6.7 million shares in the reported quarter for $416 million, or an average price of $61.96 per share. As of Dec 31, 2016 the company had a total of approximately $677 million in outstanding board repurchase authorizations.


Management projected DaVita’s consolidated operating income for 2017 in the range of $1.635–$1.775 billion. The company expects operating income of $1.525–$1.625 billion for Kidney Care. Operating income for DMG is now anticipated in the range of $110–$150 million. Operating cash flow projection for 2017 is expected at $1.750–$1.950 billion.

DaVita HealthCare Partners Inc. Price, Consensus and EPS Surprise

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Stocks to Consider

DaVita carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector include Glaukos Corporation GKOS, Avinger, Inc. AVGR and Fluidigm Corporation FLDM. Notably, Glaukos sports a Zacks Rank #1 (Strong Buy) while Avinger and Fluidigm carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Glaukos Corporation has a long-term expected earnings growth rate of approximately 25%. Notably, the stock registered an impressive one-year return of 180.8%.

Avinger projects sales growth of 30.7% for the current year. Additionally, the company posted a positive earnings surprise of 27% last quarter.

Fluidigm Corporation has a long-term expected earnings growth rate of 25%. The stock has added 10.3% over the last one-year.

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