DaVita Stock Declines 1.2% in 3 Months: Here's How to Play

DaVita Inc.’s DVA investors have been experiencing some short-term losses of late. Shares of this Denver, CO-based comprehensive kidney care provider have lost 1.2% in the past three months in contrast to the industry and the sector’s 2.6% and 1.1% gains, respectively. The stock has, however, outperformed the S&P 500’s 3.6% decline.A major development at DVA in recent months was the announcement of its promising fourth-quarter 2024 results in February. The company reported robust improvement in the top and bottom lines in the fourth quarter of 2024. Strength in segmental revenues during the quarter was also recorded. On the earnings call, management confirmed that within U.S. dialysis, DVA continued to benefit from innovation in its revenue cycle operations. Enhanced collection performance and contracting propelled higher revenue per treatment growth during the quarter.However, the per-day decrease in total U.S. dialysis treatments for the fourth quarter on a sequential basis and the year-over-year decline in normalized non-acquired treatment were disappointing. Mortality and mistreatment rates remained elevated in the fourth quarter and new patient starts were negatively impacted by supply constraints at DVA’s peritoneal dialysis solutions. This raises our apprehension.DVA Three-Month Price ComparisonImage Source: Zacks Investment ResearchOver the past three months, the stock’s performance has been bleak, underperforming its peers, such as Fresenius Medical Care AG FMS. However, DVA outperformed its other peer, Unicycive Therapeutics, Inc. UNCY. FMS’ shares have gained 7.2%, while UNCY’s shares have plunged 22.5% in the same time frame.Despite the potential within the renal care market, driven by a growing addressable market, the downward estimates indicate that the company might not be able to overcome the negative market momentum any time soon.DVA expects its adjusted earnings per share (EPS) for full-year 2025 in the range of $10.20-$11.30. The Zacks Consensus Estimate is currently pegged at $10.76. Additionally, the Zacks Consensus Estimate for first-quarter 2025 EPS is currently pegged at $1.75.DaVita’s patient-centric care model leverages its platform of kidney care services to maximize patient choice in both models and modalities of care. Its U.S. dialysis and related lab services (U.S. dialysis) business treats patients with chronic kidney failure in the United States, while its U.S. integrated kidney care (IKC) business provides integrated care and disease management services to patients in risk-based integrated care arrangements and to patients in other integrated care arrangements across the United States. Each reflects multiple growth drivers, promising robust growth potential.DVA’s Estimate MovementEstimates for DaVita’s 2025 earnings have moved 4.3% south to $10.76 in the past 60 days.Image Source: Zacks Investment ResearchDVA’s Fundamentals Aid GrowthDaVita is a dominant force in the U.S. dialysis industry, operating 2,657 outpatient centers across 46 states and the District of Columbia, serving approximately 200,800 patients. This expansive network provides dialysis, administrative and lab services and contributes about 88% of its total consolidated revenues, establishing a stable foundation for recurring income and operational scale.DaVita has made significant strides in integrated kidney care through its IKC segment, which managed 70,400 patients under risk-based arrangements and an additional 11,600 under other integrated models in 2024. By aligning with Medicare Advantage plans and Center for Medicare and Medicaid Innovation’s Comprehensive Kidney Care Contracting model, DVA is positioned to benefit from the shift toward value-based reimbursement while improving outcomes and controlling costs.Beyond its U.S. operations, DaVita continues to grow its international presence, managing or administering 509 outpatient dialysis centers across 13 countries, serving approximately 80,300 patients as of year-end 2024. This global expansion diversifies revenue sources, reduces geographic concentration risk and positions it to capture long-term demand in emerging and developed healthcare markets.DaVita’s Strong Payor Diversification and Strategic Physician PartnershipsDaVita’s revenue model benefits from a diversified payor mix. While 67% of U.S. dialysis revenues in 2024 came from government programs, commercial insurance, which covers only 11% of patients, contributed around 27% of revenues. These higher-paying commercial contracts are vital for profitability and are secured through longstanding negotiated arrangements with payors, many of which include annual price escalators.Additionally, DVA’s strategic physician relationships further enhance its operational model. Nearly 5,300 nephrologists refer patients to DaVita centers, and over 900 physicians serve as medical directors under long-term contracts. These partnerships ensure clinical oversight, regulatory compliance, and strong referral pipelines, while joint ventures with nephrologists and hospitals contributed approximately 30% of U.S. dialysis revenues in 2024.Challenges Ahead for DVADaVita faces significant cost pressure from inflation, staffing shortages and increased wage expectations. It has experienced challenges in hiring and retaining skilled clinical personnel. California’s SB 525 minimum wage law adds to the cost burden. These rising expenses, if not offset by reimbursement adjustments or cost-efficiency initiatives, could erode margins and negatively impact operating performance.DaVita’s profitability is heavily reliant on higher-paying commercial insurance, which covers only 11% of U.S. dialysis patients but contributes approximately 27% of related revenues. A decline in this mix — due to economic downturns, loss of employer coverage, regulatory shifts, or plan design changes — could materially reduce earnings. Rate renegotiations with commercial payors and the growing use of restrictive plan designs further amplify this risk.DaVita’s Stock ValuationDVA’s forward 12-month P/E of 13.4X is lower than the industry average of 19.9X but higher than its five-year median of 13X.Image Source: Zacks Investment ResearchOur Final TakeThere is no denying that DaVita is favorably positioned in terms of core business strength, earnings prowess, robust financial footing and global opportunities. This Zacks Rank #3 (Hold) company’s strong core growth prospects present a good reason for existing investors to retain shares for potential future gains. Given the current low prices, new investors may be tempted to add the stock to their portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Its Zacks Style Score indicates superior performance expectations compared with its industry peers. It is still valued lower than the industry, which suggests room for growth if it can align more closely with overall market performance.  DVA's Growth Score of A suggests continued uptrend potential.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>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 Fresenius Medical Care AG & Co. KGaA (FMS): Free Stock Analysis Report Unicycive Therapeutics, Inc. (UNCY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks