DaVita Inc. DVA is scheduled to report fourth-quarter 2024 results on Feb. 13, after the closing bell.

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In the last reported quarter, the company’s earnings per share (EPS) of $2.59 lagged the Zacks Consensus Estimate by 6.2%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on three occasions and missed once, delivering an earnings surprise of 10.6%, on average.

For fourth-quarter 2024, the Zacks Consensus Estimate for revenues is pegged at $3.25 billion, implying an improvement of 3.5% from the prior-year quarter’s reported figure. The consensus estimate for EPS is pegged at $2.21, indicating an uptick of 18.2% from the prior-year period’s reported number.

Estimate Movement

Earnings estimates for DaVita’s 2024 earnings have remained flat at $9.71 in the past 60 days.

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Let’s check out the factors that have shaped DVA’s performance prior to this announcement.

Factors Likely to Aid DaVita

On third-quarter 2024 earnings call in October 2024, DaVita’s management confirmed that its operations were impacted by the devastation caused by Hurricane Helene and Milton. As a result of these hurricanes, the company had to temporarily suspend new patient starts on peritoneal dialysis (PD). Also, key supply lines were disrupted by Hurricane Helene due to the closing of Baxter's North Cove facility. Baxter supplies DVA with the majority of its PD solution used for home PD therapy and saline used during each in-center hemodialysis treatment.

However, as the challenges occurred near the end of the third quarter, the impact on the quarterly financial results was minimal. For the fourth quarter of 2024, management estimates an impact of approximately $10 million to $20 million on its adjusted operating income due to the high supply costs, lower PD patient starts and lower productivity from its home caregivers.

The per-day decrease in total U.S. dialysis treatments for the third quarter on a sequential basis and the year-over-year decline in normalized non-acquired treatment do not look promising. DVA continued to face volume and labor pressures during the third quarter, raising our apprehension.

On the same call, management stated that DaVita’s revenue cycle performance has been able to sustain the strong revenue per treatment (RPT) results witnessed throughout the year. Management was also optimistic about its growth, which was expected to be within the range of 3.5-4%. This looks promising for the company's fourth-quarter 2024 results.

DaVita’s fourth-quarter 2024 revenues are also likely to be aided by its expanded operations in Ecuador and Chile. In March 2024, DaVita announced that it had agreed to terms on expanding its international operations in Brazil and Colombia and entering Chile and Ecuador. The Colombia deal was expected to close during the fourth quarter of 2024. These raise our optimism about the stock.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has higher chances of beating estimates. This is not the case here, as you can see below.

Earnings ESP: DaVita has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares Outperform Industry, Sector and S&P

Over the past three months, shares of DaVita have gained 10.5%. The stock has outperformed the Medical - Outpatient and Home Healthcare’s 0.1% rise. DVA’s shares also outperformed the Zacks Medical sector’s decrease of 3.4% and the S&P 500’s rise of 1.7%.

Three Months Price Comparison

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Key Valuation Metric

From a valuation standpoint, DaVita’s forward 12-month price-to-earnings (P/E) is 15.1X, a discount to the industry's average of 21X. The company is also trading at a significant discount to other industry players like Addus HomeCare Corporation ADUS, whose current P/E is 18.9X, Quest Diagnostics Incorporated DGX, whose current P/E is 17X, and Amedisys, Inc. AMED, whose current P/E is 19X. This suggests that investors may be paying a lower price relative to the company's expected sales growth.

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Long-Term Investment Visibility

DaVita expects to close the purchase agreements with Fresenius Medical Care to acquire their dialysis service operations in Brazil in the first quarter of 2025. Once fully operational, this acquisition is likely to generate additional revenues for the company.

In June 2024, Centers for Medicare & Medicaid Services (CMS) issued a proposed rule to update the Medicare end stage renal disease (ESRD) Prospective Payment System payment rate and policies for the calendar year 2025. If the proposed rule gets finalized, it will allow Medicare payment for dialysis in the home setting for beneficiaries with acute kidney injury and update requirements for the ESRD Quality Incentive Program. CMS estimates that the overall impact of the proposed rule will increase ESRD freestanding facilities’ average reimbursement by 2.1% in 2025. This is likely to aid DVA in expanding its patient coverage, thereby generating additional revenues.

However, in 2025, management continues to expect the mortality rate to remain elevated and the impact of the Baxter facility closure to continue. DVA is also likely to witness the full-year effect of the expiration of its 2% interest rate caps, which is expected to negatively impact EPS. These raise our apprehension.

Our Final Take

There is no denying that DaVita sits favorably in terms of core business strength, earnings prowess, robust financial footing and global opportunities. The stock’s strong core growth prospects are a good reason for existing investors to retain shares for potential future gains. 

For those exploring to make new additions to their portfolios, the valuation indicates expectations of superior performance compared with its industry and sector peers. However, as it is still valued lower than the broader market, it suggests potential room for growth if it can align more closely with overall market performance. As the chances of beating estimates are unlikely, it would be unwise to add the stock to one’s portfolio. However, if investors are already holding the stock, it would be prudent to hold on to it at present. The favorable Zacks Style Score with a Growth Score of B suggests continued uptrend potential for DVA.

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