BofA Downgrades DaVita On Low Exposure to Volume Rebound

Since dialysis is a stable business, Davita Inc DVA remained resilient during the pandemic. However, now with acceleration in volumes is poised to begin, the company “is not as levered to the expected utilization rebound as peers,” according to BofA Securities.

The DaVita Analyst: Kevin Fischbeck downgraded the rating for DaVita from Neutral to Underperform, while reducing the price target from $127 to $118.

The DaVita Thesis: Hospitals are best positioned to benefit from the expected above average growth in procedures due to pent-up demand during the pandemic, Fischbeck said in the downgrade note.

“Health care utilization is likely to recover in the back half of 2021, with continued vaccinations and a return to elective procedures,” the analyst added.

Fischbeck noted, however, that DaVita is likely to underperform peers, with dialysis seeing “headwinds from high mortality.”

He elaborated in the note, “DVA guided to 2021 operating income (OI) slightly below expectations given same store volumes are expected to decline 1-2% y/y due to the higher mortality of dialysis patients during the pandemic.”

DVA Price Action: Shares of DaVita had declined by 2.43% to $108.17 at the time of publication Friday afternoon.

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