DaVita Scales 52-Week High on Q2 Beat and Raised Outlook

On Aug 29, 2014, shares of DaVita HealthCare Partners Inc. DVA scaled a 52-week high of $74.99 buoyed by a solid second-quarter earnings beat. With about 0.5 million shares exchanging hands in the last trading session, shares closed at $74.68, gaining 0.4%.

The year-to-date return from the stock came in at 17.9%, which was ahead of the S&P's return of 8.4%. With respect to earnings performance, this kidney care service provider has delivered positive surprises in three of the last four quarters, with an average beat of 2.2%.

In the second quarter, DaVita posted earnings of 95 cents per share that surpassed the Zacks Consensus Estimate by about 8% and improved nearly 3.3% year over year. Improvement in the Kidney Care segment, strong clinical outcome and Medicare Advantage revenues drove earnings. Rise in patient service revenues, capitated revenues and other revenues helped DaVita's top line to improve 10.5% year over year and beat the Zacks Consensus Estimate.

Total U.S. dialysis treatments increased 5.6% from the year-ago quarter, while non-acquired treatment increased 5% at DaVita.

Backed by healthy earnings, DaVita raised the lower end of its operating income guidance that currently stands at $1.755–$1.840 billion, translating to a 13.5–18.7% year-over-year improvement.

Riding on these positives, this Zacks Rank #3 (Hold) stock has witnessed upward revisions in the Zacks Consensus Estimate in the last 30 days. For 2014, the Zacks Consensus Estimate for earnings moved north by 0.3% to $3.61 per share as 6 of 11 estimates were raised while for 2015, it increased 1% to $4.00 as 7 of 11 estimates moved up. The expected long-term earnings growth is 10.6%.

Other Stocks to Consider

Better-ranked medical service providers include Almost Family Inc. AFAM, Amedisys Inc. AMED and Gentiva Health Services Inc. GTIV. All these stocks sport a Zacks Rank #1 (Strong Buy).