DaVita Stock Gains 40.1% Year to Date: What's Behind the Rally?

DaVita, Inc. DVA has witnessed strong momentum year to date. Its shares have risen 40.1% compared with the industry’s growth of 11.5%. The S&P 500 composite has gained 27.7% in the same period.DaVita, carrying a Zacks Rank #3 (Hold) at present, is witnessing an upward trend in its stock price, prompted by the company’s business model. The optimism, led by a decent third-quarter 2024 performance and the acquisition of dialysis centers, is expected to contribute further.DaVita is a leading provider of dialysis services in the United States to patients suffering from chronic kidney failure, also known as end-stage renal disease (“ESRD”). The company operates kidney dialysis centers and provides related medical services in dialysis centers and contracted hospitals across the country. Its services include outpatient dialysis , hospital inpatient dialysis and ancillary facilities such as ESRD laboratory and disease management services.Image Source: Zacks Investment ResearchCatalysts Driving DaVita’s GrowthThe rally of the stock price can be attributed to the strength of its dialysis and related lab services along with the company’s expansion into international markets. The optimism led by a solid third-quarter 2024 performance and robust business potential are expected to contribute further.DaVita is experiencing significant growth driven by its patient-centric care approach, leveraging the company’s kidney care services platform to offer a wide range of treatment models and modalities. The increasing prevalence of value-based partnerships in kidney health enables nephrologists, physicians and transplant programs to collaborate more effectively, enhancing the understanding of individual patient needs and facilitating improved care coordination and early interventions.A key element of DaVita’s growth strategy is the acquisition of dialysis centers and related businesses, as evident from the recent extension of its pilot phase for a supply and collaboration agreement with Nuwellis. In June 2024, Nuwellis announced the extension of its pilot phase under the company’s previously announced supply and collaboration agreement with DaVita until Aug. 31, 2024.DaVita is also steadily expanding in the international markets which seems to interest investors. In the past few years, the company has strengthened its position in the emerging and developing markets of Brazil, China, Colombia, Germany, India, Malaysia, Netherlands, Poland, Portugal and Saudi Arabia through strategic alliances as well as acquisitions of dialysis centers. Currently, DaVita is seeking to expand in major European and Asian countries via acquisitions and partnerships.As of Sept. 30, 2024, DaVita provided dialysis services to around 265,400 patients at 3,113 outpatient dialysis centers, of which 2,660 were in U.S. centers while 453 were located across 13 other countries. During the third quarter of 2024, the company opened three dialysis centers in the United States. It also acquired one and opened four dialysis centers outside the United States in the same period.As of Sept. 30, DaVita had approximately 69,500 patients in risk-based integrated care arrangements in its Integrated Kidney Care business, representing $5.4 billion in annualized medical spending. The company also had an additional 13,900 patients in other integrated care arrangements.Furthermore, DaVita has reiterated its earnings predictions for fiscal 2024, forecasting adjusted EPS in the range of $9.25 to $10.05, up from the prior band of $9-$9.80, which is likely to attract further interest from investors.DVA’s Risk FactorDaVita faces a risk of reduced profitability when patients shift from commercial insurance to government programs, as government reimbursement rates are significantly lower. This shift could be triggered by rising unemployment, impacting DaVita's revenues and profit margins.DVA’s EstimatesThe Zacks Consensus Estimate for DaVita’s 2024 and 2025 bottom line is expected to increase 14.6% and 15.7%, respectively, to $9.71 and $11.42 year over year.In the past 30 days, the Zacks Consensus Estimate for the company's 2024 earnings has remained constant.Revenues for 2024 and 2025 are anticipated to rise 5.5% and 3.7%, respectively, to $12.8 billion and $13.3 billion on a year-over-year basis.Key PicksSome better-ranked stocks in the broader medical space are Masimo MASI, Accuray ARAY and AxoGen AXGN.Masimo, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated growth rate of 11.8% for 2025. You can see the complete list of today’s Zacks #1 Rank stocks here.MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 49.4% compared with the industry’s 6.7% growth year to date.Accuray, carrying a Zacks Rank #2 (Buy) at present, has an estimated growth rate of 1200% for 2025. Its earnings missed estimates in three of the trailing four quarters and met in one, delivering an average negative surprise of 141.97%.ARAY’s shares have lost 32.2% against the industry’s 6.7% growth year to date.AxoGen, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 252% for 2025. It delivered a trailing four-quarter average earnings surprise of 91.11%.AXGN’s shares have risen 111% year to date compared with the industry’s 6.7% growth.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>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 Accuray Incorporated (ARAY): Free Stock Analysis Report DaVita Inc. (DVA): Free Stock Analysis Report Masimo Corporation (MASI): Free Stock Analysis Report AxoGen, Inc. (AXGN): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks