DaVita (DVA) to Report Q1 Earnings: What's in the Offing?
DaVita Inc. DVA is scheduled to release first-quarter 2023 results on May 8, after the closing bell.
In the last reported quarter, the company’s earnings of $1.11 per share surpassed the Zacks Consensus Estimate by 26.1%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on two occasions and lagged the same in the other two, delivering an earnings surprise of 2.5%, on average.
Let’s see how things have shaped up prior to this announcement.
Factors at Play
On fourth-quarter 2022 earnings call in February, DaVita confirmed that it continued to witness treatment volume and labor-related headwinds in the reported quarter. Management confirmed that the headwinds in volumes and contract labor costs did not begin to improve in the quarter but have been in line with DaVita’s most recent expectations. Per the company, the labor environment continues to be challenging across many dimensions, with slight sequential improvement in the quarter.
Labor costs have continued to remain a challenge over the past few months, with higher contracted labor utilization and wage increases. Despite management’s efforts to offset the impact of wage and other inflationary increases, these are likely to have weighed on the company’s first-quarter 2023 top line.
DaVita Inc. Price and EPS Surprise
DaVita Inc. price-eps-surprise | DaVita Inc. Quote
On a positive note, DaVita is currently focusing on reducing contract labor, which has been aiding the company in reducing its costs. Although the company expects its contract labor costs to be higher than pre-COVID levels, it will significantly improve in 2022.
On the same call, DaVita confirmed that it expects excess mortality to continue throughout 2023. In the fourth quarter, the company witnessed a lower patient count due to excess mortality and a higher seasonal missed treatment rate. This is likely to have continued in the first quarter, weighing on the to-be-reported quarter’s treatment volumes and impacting the overall top line. However, per DaVita, COVID-19 infections and mortality rates in December and January were lower than the prior years. The decline is likely to have continued for the rest of the first quarter, potentially leading to a faster recovery in volumes and top line.
DaVita continued to witness lower U.S. dialysis treatments per day and revenue per treatment. However, the company witnessed increased hospital inpatient dialysis revenues, favorable changes in government rates driven by the administration of influenza vaccines, favorable changes in the commercial mix and the continued migration to Medicare Advantage plans. These factors are likely to have continued into the first quarter, thereby driving up the quarter’s revenues.
However, the reinstatement of Medicare sequestration is likely to continue to have a negative impact on first-quarter revenues.
On the fourth-quarter 2022 earnings call, DaVita confirmed that its Integrated Kidney Care business is expected to deliver another year of significant patient growth. This is likely to have a positive impact on first-quarter revenues, thereby driving up quarterly revenues.
The Estimate Picture
For first-quarter 2023, the Zacks Consensus Estimate of $2.83 billion for total revenues calls for an uptick of 0.4% from the prior-year reported figure.
The Zacks Model estimate first-quarter total revenues to be $2.83 billion, in line with the Zacks Consensus Estimate.
The consensus estimate for earnings per share is pegged at $1.08, indicating a decline of 32.9% from the prior-year reported number.
Our model estimates first-quarter earnings to be $1.02, reflecting a decline of 36.5% year over year.
What Our Model Suggests
Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP has higher chances of beating estimates. This is not the case here, as you can see below.
Earnings ESP: DaVita has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.
Aptinyx Inc. APTX has an Earnings ESP of +19.23% and a Zacks Rank of 2. APTX has an estimated growth rate of 42.6% for 2024. You can see the complete list of today’s Zacks #1 Rank stocks here.
Aptinyx’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 6.6%.
BellRing Brands, Inc. BRBR has an Earnings ESP of +1.38% and is a Zacks #2 Rank stock. BRBR has an estimated long-term growth rate of 12.7%.
BellRing Brands’ earnings surpassed estimates in all the trailing four quarters, with the average surprise being 19.1%.
Surrozen, Inc. SRZN has an Earnings ESP of +13.86% and carries a Zacks Rank of 2 at present. SRZN has an estimated long-term growth rate of 38.4%.
Surrozen’s earnings surpassed estimates in all the trailing four quarters, with the average surprise being 43.9%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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
DaVita Inc. (DVA) : Free Stock Analysis Report
Aptinyx Inc. (APTX) : Free Stock Analysis Report
BellRing Brands Inc. (BRBR) : Free Stock Analysis Report
Surrozen, Inc. (SRZN) : Free Stock Analysis Report
