Denver, CO-based DaVita HealthCare Partners Inc. DVA, a leading provider of dialysis services in the U.S., announced a joint venture with Inspira Health Network to expand dialysis services at the Bridgeton, Millville and Vineland centers of South Jersey.
We note that, DaVita represents a negative year-to-date return of almost 7.9%, wider than the Zacks categorized Home Care Market sub-industry’s return of roughly -6.8% and S&P 500’s return of 7.2% over the same time frame. In fact, post the last quarter’s unsatisfactory earnings performance, shares further slashed, adding to our woes.
However, we are positive about the recent alliance with Inspira. Although, shares of DaVita dropped almost 0.8% to close at $64.23 following the news release due to the lackluster market trend.
The estimate revision trend, on the other hand, seems quite favorable for the stock at this moment, with two estimates moving up in the last one month and one going down, indicating chances of recovery ahead. Notably, the current year estimate for the stock stands at $3.75 per share.
Coming back to the deal, we note that, Inspira is a non-profit health care organization which operates across the communities in southern New Jersey. Notably, all employees of Inspira have been offered positions in the latest venture. No other terms of the deal have been disclosed.
Apart from partnering with the three medical centers of Inspira, DaVita aims at exploring new opportunities across the nation and adjacent communities to address the unmet needs of dialysis care.
In fact, the global trends of the dialysis markets (hemodialysis & peritoneal) are very lucrative, as it is expected to multiply at a CAGR of 6.2%, reaching a worth of $93.83 billion by 2020 (Markets And Markets).
Our Take
DaVita has been a pioneer in kidney care and developments like these fortify the company’s footprint across markets. Per management, The Centers for Medicare & Medicaid Services (CMS) has recognized DaVita as a clinical leader in the CMS Five-Star Quality Rating System for the third year in a row.
DaVita holds a long-term expected earnings growth of almost 10.2% and an earnings yield of 5.8%, better than the industry average of 4.4%. Of the recent developments, the partnership with Rock Health is notable in our view.
Zacks Rank & Key Picks
Currently, DaVita has a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader medical sector include Addus HomeCare Corporation ADUS, LHC Group, Inc. LHCG and HealthSouth Corporation HLS. Addus HomeCare and LHC Group sport a Zacks Rank #1 (Strong Buy) while HealthSouth carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Addus HomeCare has a long-term expected earnings growth rate of approximately 15%. Notably, the stock represents an impressive one-year return of 51.8%.
LHC Group has a long-term expected earnings growth rate of 15%. The company has returned almost 7.7% in the last one month.
HealthSouth has an expected earnings growth of almost 13.2%. The company posted a promising year-to-date return of 17.4%.
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