Zacks Investment Research upgraded shares of DaVita HealthCare Partners Inc. (DVA) from NEUTRAL to OUTPERFORM on November 16, 2012, with a target price of $135.00.
We are upgrading our recommendation on DaVita to Outperform based on expected growth in its future cash flows and the recent merger. However, DaVita's third quarter earnings lagged the Zacks Consensus Estimate due to high operating expenses. Yet, earnings witnessed year-over-year hike due to strong revenues in the quarter. Moreover, the sturdy balance sheet provides opportunities for meaningful mergers and acquisitions. Consequently, DaVita is rapidly expanding its international presence and is actively acquiring domestic companies. However, high dependence on commercial payors and government reimbursements are the downsides. Moreover, rising debt is hurting the company's financial leverage. Nevertheless, the positive factors outweigh the negatives, raising our expectations for growth in the upcoming years.
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