DVA Q3 Estimates Unchanged Before Earnings: How to Play the Stock?

Core Viewpoint - DaVita Inc. is expected to report third-quarter 2024 results on October 29, with revenue estimates at $3.22 billion, reflecting a 3.2% year-over-year increase, while EPS is projected at $2.76, indicating a 3.2% decline from the previous year [1] Financial Performance - In the last reported quarter, DaVita's EPS was $2.59, exceeding the Zacks Consensus Estimate by 4.9%, and the company has consistently outperformed earnings estimates over the past four quarters with an average earnings surprise of 24.2% [1] - Earnings estimates for DaVita's 2024 earnings have remained flat at $9.99 over the past 60 days [2] Revenue Drivers - Continued strength in revenue per treatment (RPT) has been a key contributor to DaVita's performance, supported by improvements in collection capabilities and targeted investments in technology [3][4] - Health plan negotiations have resulted in modestly higher rate increases due to inflation, which is expected to positively impact quarterly revenues [4] - Management anticipates stronger results from the Integrated Kidney Care business in the second half of the year, driven by timing of revenue recognition [4] International Expansion - DaVita has expanded its international operations in Brazil and Colombia, with acquisitions in Ecuador and Chile already closed, likely contributing additional revenues in the third quarter [4][10] Stock Performance - Year-to-date, DaVita's shares have gained 52.2%, outperforming the Medical - Outpatient and Home Healthcare sector's 16.8% rise, as well as the Zacks Medical sector's increase of 4.6% and the S&P 500's rise of 21.9% [6] - DaVita's forward 12-month price-to-earnings (P/E) ratio is 14.5X, which is a discount compared to the industry average of 21.2X and other industry players [7] Long-Term Outlook - DaVita is expected to maintain strong performance in 2024 due to investments in technology aimed at improving automation and claims processing [9] - The company is optimistic about its innovation track record and cost structure discipline, which are expected to enhance RPT growth [9] Investment Considerations - DaVita's core business strength, earnings potential, and global opportunities suggest favorable growth prospects, making it a consideration for existing investors [11] - The current valuation indicates potential for superior performance compared to industry peers, but the stock is still valued lower than the broader market, suggesting room for growth [11]