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Here's Why You Should Add DaVita (DVA) to Your Portfolio
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DaVita Inc. (DVA - Free Report) has been gaining from its business model. The optimism led by a solid first-quarter 2024 performance and the acquisition of dialysis centers is expected to contribute further. However, concerns regarding its dependence on commercial payers and macroeconomic challenges persist.
So far this year, this Zacks Rank #2 (Buy) stock has gained 33.8% compared with a 4.5% rise of the industry and 18.8% growth of the S&P 500.
The renowned global comprehensive kidney care provider has a market capitalization of $12.22 billion. The company projects 13.6% growth for the next five years and expects to maintain its strong performance. DaVita’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 29.35%.
Image Source: Zacks Investment Research
Upsides
Business Model: Investors are optimistic about DaVita’s patient-centric care model, which leverages its platform of kidney care services to maximize patient choice in both models and modalities of care. Value-based arrangements are proliferating in the kidney health space. These arrangements allow a much larger degree of collaboration between nephrologists, providers and transplant programs, resulting in a more complete understanding of each patient’s clinical needs. Per management, this is expected to lead to better care coordination and earlier intervention.
The company’s other operations include ancillary services that are primarily aligned with its core business of providing dialysis services to our network of patients.DaVita announced that it has agreed to terms on expanding its international operations in Brazil and Colombia, and its entry into Chile and Ecuador. The deal, involving four separate acquisitions from Fresenius Medical Care, is consistent with DaVita's disciplined investment strategy.
Acquisition of Dialysis Centers: Acquiring dialysis centers and businesses that own and operate dialysis centers as well as other ancillary services is DaVita’s preferred business strategy. These strategies have boosted the company’s top line to a large extent, raising investors’ optimism.
As of Mar 31, 2024, DaVita provided dialysis services to around 258,600 patients at 3,092 outpatient dialysis centers, of which 2,665 were U.S. centers while 427 were located across 12 other countries. During the first quarter of 2024, the company opened two and acquired a total of nine new dialysis centers in the United States and 67 centers outside the country.
Strong Q1 Results: DaVita ended the first quarter of 2024 with better-than-expected results. The uptick in the company’s overall top-line and bottom-line performances was encouraging. The opening of dialysis centers within the United States and acquiring centers overseas were promising.
In the first quarter, DaVita’s gross profit rose 21.7% to $991.6 million. The gross margin expanded 394 basis points (bps) to 32.3%. Adjusted operating profit totaled $629.1 million, reflecting a 30.3% surge from the prior-year quarter. Adjusted operating margin in the first quarter expanded 368 bps to 20.5%. Growth in both margins bodes well for the stock.
Downsides
Dependence on Commercial Payers: A significant portion of DaVita’s dialysis and related lab services revenues are generated from patients whose primary payers are commercial payers. The payments received from commercial payers are the primary generators of profit. However, there remains a risk of people shifting from commercial insurance schemes to government schemes due to the wide disparity in payment rates in case of a rise in unemployment.
Macroeconomic Concerns: DaVita's business is significantly impacted by various global economic and market conditions. These include challenges from the COVID-19 pandemic, inflation, rising interest rates, labor market difficulties and supply-chain disruptions. The ongoing conflict between Russia and Ukraine exacerbates these issues, contributing to widespread uncertainty and volatility.
Estimate Trend
DaVita is witnessing a positive estimate revision trend for 2024. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved 1.4% north to $9.23.
The Zacks Consensus Estimate for the company’s second-quarter 2024 revenues is pegged at $3.16 billion, suggesting a 5.4% uptick from the year-ago quarter’s reported number. The same for earnings were $2.47 per share, implying an 18.6% improvement from prior year.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Intutive Surgical (ISRG - Free Report) , DexCom (DXCM - Free Report) and Universal Health Services (UHS - Free Report) .
Intutive Surgical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 16.1%. ISRG’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.78%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intutive Surgical’s shares have risen 31.5% year to date compared with the industry’s 3.5% growth.
DexCom, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 22.9%. DXCM’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 34.1%.
DexCom’s shares have lost 9.2% against the industry’s 3.5% growth year to date.
Universal Health Services has an estimated long-term growth rate of 15.2% for 2024. UHS’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.12%. It carries a Zacks Rank #2.
Universal Health Services’ shares have risen 20.7% year to date compared with the industry’s 17.5% growth.
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Here's Why You Should Add DaVita (DVA) to Your Portfolio
DaVita Inc. (DVA - Free Report) has been gaining from its business model. The optimism led by a solid first-quarter 2024 performance and the acquisition of dialysis centers is expected to contribute further. However, concerns regarding its dependence on commercial payers and macroeconomic challenges persist.
So far this year, this Zacks Rank #2 (Buy) stock has gained 33.8% compared with a 4.5% rise of the industry and 18.8% growth of the S&P 500.
The renowned global comprehensive kidney care provider has a market capitalization of $12.22 billion. The company projects 13.6% growth for the next five years and expects to maintain its strong performance. DaVita’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 29.35%.
Image Source: Zacks Investment Research
Upsides
Business Model: Investors are optimistic about DaVita’s patient-centric care model, which leverages its platform of kidney care services to maximize patient choice in both models and modalities of care. Value-based arrangements are proliferating in the kidney health space. These arrangements allow a much larger degree of collaboration between nephrologists, providers and transplant programs, resulting in a more complete understanding of each patient’s clinical needs. Per management, this is expected to lead to better care coordination and earlier intervention.
The company’s other operations include ancillary services that are primarily aligned with its core business of providing dialysis services to our network of patients.DaVita announced that it has agreed to terms on expanding its international operations in Brazil and Colombia, and its entry into Chile and Ecuador. The deal, involving four separate acquisitions from Fresenius Medical Care, is consistent with DaVita's disciplined investment strategy.
Acquisition of Dialysis Centers: Acquiring dialysis centers and businesses that own and operate dialysis centers as well as other ancillary services is DaVita’s preferred business strategy. These strategies have boosted the company’s top line to a large extent, raising investors’ optimism.
As of Mar 31, 2024, DaVita provided dialysis services to around 258,600 patients at 3,092 outpatient dialysis centers, of which 2,665 were U.S. centers while 427 were located across 12 other countries. During the first quarter of 2024, the company opened two and acquired a total of nine new dialysis centers in the United States and 67 centers outside the country.
Strong Q1 Results: DaVita ended the first quarter of 2024 with better-than-expected results. The uptick in the company’s overall top-line and bottom-line performances was encouraging. The opening of dialysis centers within the United States and acquiring centers overseas were promising.
In the first quarter, DaVita’s gross profit rose 21.7% to $991.6 million. The gross margin expanded 394 basis points (bps) to 32.3%. Adjusted operating profit totaled $629.1 million, reflecting a 30.3% surge from the prior-year quarter. Adjusted operating margin in the first quarter expanded 368 bps to 20.5%. Growth in both margins bodes well for the stock.
Downsides
Dependence on Commercial Payers: A significant portion of DaVita’s dialysis and related lab services revenues are generated from patients whose primary payers are commercial payers. The payments received from commercial payers are the primary generators of profit. However, there remains a risk of people shifting from commercial insurance schemes to government schemes due to the wide disparity in payment rates in case of a rise in unemployment.
Macroeconomic Concerns: DaVita's business is significantly impacted by various global economic and market conditions. These include challenges from the COVID-19 pandemic, inflation, rising interest rates, labor market difficulties and supply-chain disruptions. The ongoing conflict between Russia and Ukraine exacerbates these issues, contributing to widespread uncertainty and volatility.
Estimate Trend
DaVita is witnessing a positive estimate revision trend for 2024. In the past 60 days, the Zacks Consensus Estimate for its earnings has moved 1.4% north to $9.23.
The Zacks Consensus Estimate for the company’s second-quarter 2024 revenues is pegged at $3.16 billion, suggesting a 5.4% uptick from the year-ago quarter’s reported number. The same for earnings were $2.47 per share, implying an 18.6% improvement from prior year.
Other Key Picks
Some other top-ranked stocks in the broader medical space are Intutive Surgical (ISRG - Free Report) , DexCom (DXCM - Free Report) and Universal Health Services (UHS - Free Report) .
Intutive Surgical, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 16.1%. ISRG’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 6.78%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Intutive Surgical’s shares have risen 31.5% year to date compared with the industry’s 3.5% growth.
DexCom, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 22.9%. DXCM’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 34.1%.
DexCom’s shares have lost 9.2% against the industry’s 3.5% growth year to date.
Universal Health Services has an estimated long-term growth rate of 15.2% for 2024. UHS’ earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 8.12%. It carries a Zacks Rank #2.
Universal Health Services’ shares have risen 20.7% year to date compared with the industry’s 17.5% growth.