DaVita HealthCare Partners Inc. DVA reported third-quarter 2015 adjusted operating earnings of $1.00 per share that surpassed the Zacks Consensus Estimate by 3.09%. The reported figure also increased from the year-ago earnings of 90 cents per share.
Operational Update
Total net revenue increased 8.4% year over year to approximately $3.53 billion. Revenues were above the Zacks Consensus Estimate of $3.48 billion. The year-over-year increase was mainly attributable to rise in patient service revenues, capitated revenues and other revenues.
Total operating expenses and charges of DaVita Healthcare were $3 billion in the reported quarter, up 7.2% year over year. This was primarily due to a rise in patient care costs and other costs, general and administrative charges, and depreciation and amortization expenses in the quarter.
Total U.S. dialysis treatments in the reported quarter were approximately 6.6 million or 83,694 treatments per day. This represents a per day increase of 4.2% year over year. Growth of non-acquired treatment was 4% and normalized non-acquired treatment grew 3.5% in the reported quarter.
In the third quarter, DaVita Healthcare acquired five, opened 15, and shut down five dialysis centers in the U.S. The company also purchased six and opened two dialysis centers outside the U.S.
Segment Update
Revenues from the Dialysis and Related Lab Services segment amounted to approximately $2.2 billion, up 6% year over year. Operating income at the segment was $462 million compared with an income of $400 million in the year-ago quarter.
HealthCare Partners (HCP) generated revenues of $1 billion in the quarter, up 12.2% year over year. Operating income in the segment decreased to $83 million from $47 million a year ago.
Ancillary services and strategic initiatives recorded revenues of $345 million, higher than $300 million in the third quarter of 2014. Operating loss during the reported quarter was $30 million, wider than the year-ago loss of $6 million.
Financial Update
Total cash and cash equivalents of DaVita Healthcare decreased to $1.05 billion as of Sep 30, 2015 from $965.2 million as of Dec 31, 2014.
Net cash flow from operating activities in the third quarter was $679 million, down from $847.9 million a year ago. Cash flow was affected by post-tax payments associated with the settlement of the Vainer suit during the second quarter of 2015.
DaVita Healthcare’s long-term debt as of Sep 30, 2015 was $9.1 billion, up from $8.4 billion at year-end 2014.
Share Repurchase Update
DaVita bought back 4.6 million shares for $341 million during the reported quarter, thereby taking the tally to 5.6 million shares repurchased for $425 million in the first nine months of 2015. Subsequent to Sep 2015, the company repurchased shares worth $0.2 million. Currently, the company is left with shares worth $659 million to be repurchased.
Guidance for 2015
DaVita updated its 2015 outlook.
Management increased the consolidated operating income guidance to $1.870–$1.915 billion, from $1.825–$1.925 billion guided earlier.
The company also increased the operating income projection for Kidney Care to $1.63–$1.655 billion, from $1.600–$1.650 billion guided before. On the other hand, for HCP, operating income is now projected to be in the range of $240–$260 million as against the earlier guidance of $225–$275 million.
Operating cash flow view was upped to $1.675–$1.775 billion from $1.6–$1.75 billion.
Performance of Other Healthcare Service Stocks
Among other stocks in the health care stocks, UnitedHealth Group Incorporated UNH, Anthem Inc. ANTM and Aetna Inc. AET surpassed their respective Zacks Consensus Estimates in the third quarter.
Zacks Rank
DaVita Healthcare carries a Zacks Rank #3 (Hold).
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