DaVita Inc. DVA delivered earnings per share (EPS) of $2.30 in the second quarter of 2022, down 12.9% year over year. However, the figure exceeded the Zacks Consensus Estimate by 9%.
Our projection of EPS was $2.12.
Revenues in Detail
Revenues of $2.93 billion in the second quarter were up by 0.4% year over year. The figure, however, missed the Zacks Consensus Estimate by 0.3%.
The second-quarter revenue compares to our own estimate of $2.94 billion.
Management noted that the top line was primarily owing to normal seasonal improvements driven by patients meeting their co-insurance and deductibles; and the continued shift to Medicare Advantage plans. However, the quarterly revenues were negatively impacted by a seasonal decline in hospital inpatient dialysis treatments and a lower government rate related to the reinstatement of 1% Medicare sequestration beginning Apr 1.
Management also noted that excess mortality was down significantly from the sequentially last-reported quarter with the recession of the impact of the first Omicron surge.
The company’s dialysis patient service revenues were $2.81 billion, down by 0.3% year over year. Other revenues were $116.7 million, up 18.4% from the year-ago quarter’s figure.
This figure compares to our dialysis patient service revenues’ Q2 projection of $2.84 billion and $101.7 million, respectively.
Per management, total U.S. dialysis treatments for the first quarter were 7,269,160 or 93,194 per day, on average. This represents a per-day increase of 0.9% on a year-over-year basis.
As of Jun 30, 2022, DaVita provided dialysis services to around 243,700 patients at 3,159 outpatient dialysis centers, of which 2,810 are U.S. centers while 349 are located across 11 other countries.
During the second quarter of 2022, the company opened 18 dialysis centers and closed 17 in the United States. It also acquired two and opened one dialysis center outside the United States in the same period.
DaVita Inc. Price, Consensus and EPS Surprise
DaVita Inc. price-consensus-eps-surprise-chart | DaVita Inc. Quote
In the quarter under review, DaVita’s gross profit fell 4.3% to $909.9 million. Gross margin contracted 152 basis points (bps) to 31.1%.
We had projected 30.6% of gross margin for Q2.
General & administrative expenses climbed 5.7% to $315.2 million.
Adjusted operating profit totaled $594.8 million, reflecting 8.9% plunge from the prior-year quarter’s level. Adjusted operating margin in the second quarter contracted 207 bps to 20.3%.
Adjusted operating margin according to our model was 14.4% for Q2.
DaVita exited second-quarter 2022 with cash and cash equivalents, and short-term investments of $363.1 million compared with $346.9 million at the end of the first quarter. Total debt (including current portion) at the end of second-quarter 2022 was $9.26 billion, compared with $8.87 billion at the end of the first quarter.
Cumulative net cash flow from operating activities at the end of second-quarter 2022 was $510.3 million, compared with $834 million a year ago.
DaVita repurchased 3.9 million shares of its common stock for $370 million during the reported quarter. Management also informed that from Jun 30, 2022 to Jul 29, 2022, the company repurchased 0.9 million shares of its common stock for $75 million.
DaVita has reiterated its financial outlook for full-year 2022.
Adjusted EPS for the full year is still projected in the range of $7.50-$8.50. The Zacks Consensus Estimate for the same currently stands at $7.80.
DaVita ended the second quarter of 2021 with lower-than-expected revenues. Dismal overall bottom-line result is disappointing. A fall in the company’s dialysis patient service revenues during the second quarter is concerning. Contraction of both margins also does not bode well for the company. Foreign exchange headwinds and stiff competition continue to weigh on DVA.
However, the company registered strength in Other revenues during the period, which is impressive. The acquisition of several dialysis centers and opening of others, both within the United States and overseas, are also encouraging. Per-day increase in total U.S. dialysis treatments is also promising.
Zacks Rank and Key Picks
DaVita currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, Humana Inc. HUM and Alkermes plc ALKS.
Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Quest Diagnostics has an earnings yield of 7.1% compared with the industry’s 3.2%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.
Humana, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $8.67, which beat the Zacks Consensus Estimate by 13%. Revenues of $23.7 billion outpaced the consensus mark by 1.2%.
Humana has an estimated long-term growth rate of 13.5%. HUM’s earnings surpassed estimates in all the trailing four quarters, the average being 9.1%.
Alkermes reported second-quarter 2022 adjusted EPS of 6 cents, which surpassed the Zacks Consensus Estimate by 50%. Second-quarter revenues of $276.2 million outpaced the Zacks Consensus Estimate by 1.1%. It currently has a Zacks Rank #2.
Alkermes has an estimated long-term growth rate of 24.9%. ALKS’s earnings surpassed estimates in all the trailing four quarters, the average being 325.5%.
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