MW DaVita's stock leads S&P 500 decliners after Berkshire pares stake. Its soft guidance isn't helping.

By Ciara Linnane

DaVita Inc.'s stock was tumbling 13.5% Friday to lead S&P 500 decliners, after Warren Buffett's Berkshire Hathaway Inc. pared its stake in the provider of kidney dialysis.

DaVita's stock $(DVA)$ was on track for its biggest one-day selloff in a year and a half, according to Dow Jones Market Data, and has fallen for three of the past five days. The last time it fell this much was Oct. 11, 2023, when it closed down 16.9%.

Berkshire $(BRK.B)$ $(BRK.A)$ sold just over 203,000 shares of Denver-based DaVita to reduce its holding to 35.9 million shares, or a 45% stake in the company, according to a regulatory filing. At current prices, that stake is worth $5.6 billion.

The move was part of an agreement with DaVita that it would buy back enough shares on a quarterly basis to reduce Berkshire's, or any investor's, stake to 45%, according to the filing.

Adding to the downdraft in share price, the company reported fourth-quarter earnings late Thursday that beat expectations but offered soft guidance for the current year.

The company said it expects 2025 per-share earnings to range from $10.20 to $11.30, below the $11.41 FactSet analys consensus.

DaVita has been hit by the costs of closing some of its outpatient clinics, which were hit hard by declining patient numbers during the COVID-19 pandemic.

The company launched a review of its capacity requirements and utilization in 2022 that continued in 2024 and led to higher charges than normal for center closures over the past few quarters.

"These capacity closure costs include net losses on assets retired, lease-termination costs, asset impairments and accelerated depreciation and amortization," DaVita said in a statement.

In the fourth quarter, that meant charges of $24.2 million, rising to $72.4 million for all of 2024.

As of year-end, DaVita had about 281,100 patients at 3,166 outpatient dialysis centers, some 2,657 of which were located in the U.S. In the fourth quarter, the company opened one center and closed five in the U.S., while acquiring 55, opening one and closing five outside the U.S.

The company had about 70,400 patients in risk-based integrated care arrangements, representing about $5.5 billion in annualized medical spend.

For the fourth quarter, the company posted net income of $259 million, or $3.09 a share, up from $215 million, or $2.50 a share, in the year-earlier period.

Adjusted for one-time items, the company had EPS of $2.24, ahead of the $2.13 FactSet consensus.

Revenue rose to $3.295 billion from $3.146 billion a year ago, also ahead of the $3.262 billion FactSet consensus.

DaVita Chief Executive Javier Rodriquez said it was a year "with unique hurdles," citing weather-related volume headwinds in the quarter, as well as flu vaccines and other seasonal fluctuations.

Truist analysts said the quarterly numbers were solid and described the guidance as "somewhat mixed."

"Cash-flow generation remains attractive, which we expect to support ongoing repurchase activity," the analysts wrote in a note to clients, as they reiterated their hold rating on the stock and their $170 price target.

DaVita's stock has gained 26% in the last 12 months, while the S&P 500 SPX has gained 22%.

-Ciara Linnane

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February 14, 2025 13:01 ET (18:01 GMT)

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