Canada Markets closed

DaVita (DVA) Banks on Kidney Care Unit Amid Labor Union Woes

Zacks Equity Research
1 / 2

Why Chevron (CVX) Could See Upstream Earnings Rise in Q1

We expect higher crude oil prices and production to lift Chevron's (CVX) upstream earnings.

On Mar 19, we issued an updated research report on DaVita Inc. DVA. The stock carries a Zacks Rank #3 (Hold).

As an operating division of DaVita, DaVita Kidney Care focuses on setting global standards for clinical, social and operational practices in kidney care. However, the company has been grappling with labor-union issues in California and Ohio.

Davita’s kidney care unit has been gaining prominence worldwide. Of the major services that it provides, the in-center hemodialysis, home hemodyalisis, peritoneal dialysis, kidney transplant, urology, diabetology and vascular access surgery deserve a mention.

In the fourth quarter of 2017, net consolidated revenues in the kidney care unit were $2.78 billion, up 3% year over year. Adjusted operating income in the segment was $430 million, up 1.8% year over year.

Further, DaVita is steadily expanding in the international markets. In the past few years, the company has strengthened its position in the emerging and developing markets of Brazil, China, Colombia, Germany, India, Malaysia, Netherlands, Poland, Portugal and Saudi Arabia through strategic alliances as well as acquisitions of dialysis centers.

These are anticipated to help DaVita deliver more efficient patient care. Currently, DaVita is seeking to expand in major European and Asian countries via acquisitions and partnerships.

Meanwhile, in California, labor unions proposed a ballot initiative that is likely to alter DaVita’s footprint in the state. If they proceed with the initiative, the company might have to incur significant one-time costs in 2018 to support their advocacy efforts. This is likely to dampen its top-line growth in the coming quarters.

Per management, the situation is likely to render a large number of centers in California financially unsustainable, which would severely limit patient access to outpatient dialysis care.

At the end of the fourth quarter of 2017, the company also announced that the unions are pursuing a similar initiative in Ohio. However, it has not included any potential advocacy costs in California and Ohio in its guidance range.

Price Performance

Over the last six months, DaVita has outperformed its industry. The company returned almost 13.2%, higher than the industry’s growth of 11%. The current level also compares favorably with the S&P 500’s gain of roughly 9.9%.

DaVita Inc. Price

 

DaVita Inc. Price | DaVita Inc. Quote

Key Picks

A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories BIO, athenahealth, Inc. ATHN and PerkinElmer PKI.

Bio-Rad Laboratories sports a Zacks Rank of #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.

athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.

PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
athenahealth, Inc. (ATHN) : Free Stock Analysis Report
 
PerkinElmer, Inc. (PKI) : Free Stock Analysis Report
 
Bio-Rad Laboratories, Inc. (BIO) : Free Stock Analysis Report
 
DaVita Inc. (DVA) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research