DaVita HealthCare Partners Inc. (DVA) reported fourth-quarter 2013 net operating earnings of 99 cents per share, beating the Zacks Consensus Estimate by a penny. The number also increased 17.9% year over year.
Bottom-line growth came on the back of higher revenues during the quarter.
DaVita Healthcare’s net income came in at 99 cents per share, up 30.3% year over year.
Operational Update
Total revenue for DaVita Healthcare increased 23.6% from the prior-year quarter figure to approximately $3.06 billion. The top line was a tad higher than the Zacks Consensus Estimate of $3.05 billion. The year-over-year increase was attributable to strong performance at Dialysis and Related Lab Services segment.
Total operating expenses and charges climbed 23.4% year over year to $2.58 billion in the reported quarter primarily due to increased patient care costs and other costs as well as higher general and administrative expenses.
Adjusted operating income of DaVita Healthcare totaled $484 million during the quarter under review, up 18.62% year over year.
Total U.S. dialysis treatments for the reported quarter came in at approximately 6.1 million or 76,711 treatments per day. This represents a per day increase of 6.3% over the year-ago quarter. Growth of non-acquired treatment in the quarter was 4.7%.
During the reported quarter, DaVita Healthcare acquired 4 dialysis centers and opened 28 centers in the U.S. Additionally, the company acquired 8 dialysis centers outside the U.S.
DaVita Healthcare’s effective tax rate was 35.7% in the reported quarter, comparing unfavorably with the prior-year quarter equivalent of 34.7%. The third-party owners’ income, attributable to non-tax paying entities, impacted the effective tax rate. The effective tax rate attributable to DaVita shareholders in the reported quarter was 39%, up from 38.5% in the year-ago quarter.
Segment Update
Revenues from the Dialysis and related Lab Services segment amounted to $2 billion, up 9.6% year over year. Operating income for the segment also increased 13.8% year over year to $412 million in the reported quarter.
HealthCare Partners (HCP) generated revenues of $829 million in the quarter, surging 73.8% year over year. Growth was mainly driven by higher HCP Capitated revenues and also due to the acquisition of the Arizona Integrated Physicians. However, operating income in the segment remained unchanged at $98 million.
Ancillary services and strategic initiatives generated operating loss of 9 million during the quarter, widening from an operating loss of 8 million reported in the previous-year quarter.
Full-Year Highlights
DaVita Healthcare reported full-year 2013 operating net income of $3.81 per share, a penny ahead of the Zacks Consensus Estimate of $3.80. The number increased 17.8% year over year. Bottom-line improvement was driven by top-line growth and the acquisition of HealthCare Partners.
Including loss contingency reserve and contingent earn-out obligation adjustment, DaVita Healthcare’s net income for 2013 came in at $2.89 per share, up 5.5% year over year.
Total revenue for 2013 amounted to $11.76 billion during the year, surging 43.7% year over year. The improved top line was boosted by net patient services revenues as well as significantly higher capitated revenues.
Financial Update
Total cash and cash equivalents of DaVatia Healthcare slid to $946.2 million at the end of 2013 from $970.7 million as of the end of the third quarter.
Net cash flow from operating activities was $1.77 billion during 2013, surging 61.1% year over year. The surge was attributable to full-year operation of Health Care Partners followed by earnings growth.
DaVita Healthcare’s long-term debt as of the end of 2013 stood at $8.14 billion, declining from $8.18 billion as of Sep 30, 2013.
Guidance
DaVita Healthcare’s operating income guidance range for 2014 was increased to $1.725–$1.860 billion from $1.675–$1.850 billion expected previously. Additionally, DaVita raised the operating income guidance for the dialysis services and related ancillary businesses for 2014 to $1.475–$1.550 billion from $1.425–$1.540 billion.
DaVita Healthcare revealed the guidance for 2014 operating income for HCP, which ranges between $250 -$310 million compared unfavorably with $385 million reported for 2013.
DaVita Healthcare also expects its total operating cash flow for 2014 to stand between $1.45 billion to $1.55 billion.
Zacks Rank
DaVita Healthcare presently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks worth considering in the same space are Almost Family Inc. (AFAM), Addus HomeCare Corporation (ADUS) and China Cord Blood Corporation (CO). While Almost Family sports a Zacks Rank #1 (Strong buy), Addus HomeCare and China Cord Blood both carry the same Zacks Rank as DaVita Healthcare.
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