In a report released today, Kevin Fischbeck from Bank of America Securities reiterated a Sell rating on DaVita (DVA – Research Report), with a price target of $107.00.
Kevin Fischbeck’s sell rating for DaVita (DVA) is a culmination of various factors. DVA’s Q3 results were indeed better than expected, with adjusted operating income being 20% higher than the consensus, driven by improved margins and a slightly stronger top line. The company also managed to reduce its leverage and announced plans to resume share buybacks in Q4. Furthermore, DVA raised its OI guide for 2023 by $68 million, or 4%, following a strong quarter. However, Fischbeck is not convinced that the company’s efforts to minimize the impact from GLP1s will be successful and expects the overhang to persist until volume normalizes.
Fischbeck also noted that despite the positive results, there is potential pressure on commercial pricing and volumes, which leads him to reiterate the underperform rating. He also pointed out that while the number of treatments per day increased by 1.0% quarter on quarter, same store volumes were up only 0.5% year on year, which is below the normalized 2% target. Moreover, although DVA’s adjusted operating income margin was up significantly, the company continues to face wage rate pressure as wages grow faster than pricing. These factors combined have led Fischbeck to maintain his sell rating for DVA.
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DaVita (DVA) Company Description:
DaVita, Inc. engages in the provision of medical care services. It operates through the following two segments: US Dialysis and Related Lab Services; and Other-Ancillary Services and Strategic Initiatives. The US Dialysis and Related Lab Services segment offers kidney dialysis services in the United States for patients suffering from chronic kidney failure. The Other-Ancillary Services and Strategic Initiatives segment consist primarily of pharmacy services, disease management services, vascular access services, clinical research programs, physician services, direct primary care, end stage renal disease seamless care organizations, and comprehensive care. The company was founded in 1994 and is headquartered in Denver, CO.
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