We issued an updated research report on DaVita HealthCare Partners Inc. DVA on Dec 1, 2015.
Last month, the company reported third-quarter 2015 earnings that surpassed the Zacks Consensus Estimate and improved year over year on improved top line, which in turn was attributable to rise in patient service revenues and capitated revenues.
Acquiring dialysis centers and businesses that own and operate dialysis centers as well as other ancillary services is DaVita’s preferred business strategy. The company acquired and opened a number of dialysis centers in the U.S. as well as outside the country that contributed positively to the top line. DaVita is steadily expanding in the international markets.
In the past few years, the company strengthened its position in the emerging and developing markets like Columbia, Portugal, Malaysia, Taiwan, Saudi Arabia, China, India and Germany, through strategic alliances as well as acquisition of dialysis centers. Alongside, the company is pursuing collaborations with local hospitals to improve patient care. We expect DaVita to benefit from such efforts as these should boost its competitive advantage and operating leverage.
In terms of financial position, although cash flows decreased in the first nine months of 2015, the increased guidance for 2015 raises optimism. Additionally, the guided range compares favorably with cash flows in 2014.
However, failure to comply with the quality measures adopted by CMS per its 2016 ESRD PPS rule might adversely affect DaVita’s revenues, earnings and cash flows. Additionally, the company’s debt refinancing continues to keep its financial leverage at high levels. Additional debts in connection with the HCP transaction have elevated the outstanding debt levels significantly and are expected to increase borrowing costs going forward.
Moreover, the impact of the health care reform legislation could adversely affect DaVita’s earnings.
DaVita currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the health care services space are AmSurg Corp. AMSG, Foundation Healthcare, Inc. FDNH and LHC Group, Inc. LHCG. All three sport a Zacks Rank #1 (Strong Buy).
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
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
Be the first to comment