Dialysis provider DaVita Inc. (NYSE: DVA) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 5% year on year to $3.22 billion. Its non-GAAP EPS of $2 per share was 1% below analysts’ consensus estimates.
Is now the time to buy DVA? Find out in our full research report (it’s free).
DaVita (DVA) Q1 CY2025 Highlights:
- Revenue: $3.22 billion (5% year-on-year growth)
- Adjusted EPS: $2 vs analyst expectations of $2.02 (1% miss)
- Management reiterated its full-year Adjusted EPS guidance of $10.75 at the midpoint
- Operating Margin: 13.6%, down from 15.8% in the same quarter last year
- Sales Volumes fell 1.6% year on year (0.5% in the same quarter last year)
- Market Capitalization: $10.27 billion
StockStory’s Take
DaVita’s first quarter results were influenced by several operational and external factors, as discussed by management. CEO Javier Rodriguez highlighted the impact of an abnormally severe flu season, which contributed to higher missed treatment rates and increased patient mortality, resulting in lower treatment volumes. Additionally, Rodriguez noted that phosphate binders, now reimbursed under the new CMS policy, provided a meaningful tailwind to revenue per treatment. CFO Joel Ackerman pointed out that the company’s international segment performed well, building on previous acquisitions, and that disciplined expense management contributed positively to operating income. Management also addressed a recently disclosed cybersecurity incident, emphasizing that patient care was maintained without interruption, though some operational costs will be recognized in the following quarter.
Looking forward, DaVita’s outlook for the rest of the year centers on navigating ongoing headwinds and capitalizing on regulatory shifts. Management reiterated its full-year adjusted earnings per share guidance, citing confidence in the business’s underlying strength despite anticipated pressures from the recent cyberattack and lower treatment volumes. Rodriguez explained, “The underlying strength of our business performance in the first quarter and the increase in our forecast for profitability of orals in the bundle give us confidence in our full-year guidance.” The company is also closely monitoring potential policy changes, including the expiration of enhanced premium tax credits and their cumulative effect on operating income, as well as the evolving landscape for phosphate binder reimbursement. Management acknowledged that while some risks remain, including regulatory and volume-related uncertainties, initial trends in new patient admissions and drug mix have been encouraging.
Key Insights from Management’s Remarks
Management attributed quarterly results to lower-than-expected treatment volumes from elevated flu activity, a favorable mix of phosphate binders, and strong international operations. The company also highlighted the operational impact of a recent cybersecurity incident and evolving reimbursement policies.
-
Flu and treatment volume: Management reported that the severe flu season led to higher missed treatment rates and increased patient mortality, resulting in a notable decline in overall treatment volumes compared to forecasts. This decrease was further exacerbated by winter storms early in the quarter.
-
Phosphate binder reimbursement: The transition of phosphate binders into the CMS dialysis benefit contributed positively to revenue per treatment. Management described an uptick in prescriptions for iron-based binders, which are more effective for certain patients, resulting in higher-than-expected profitability from this drug class.
-
International segment performance: The company’s international business showed improved operating income, supported by the integration of recent acquisitions, particularly in Latin America. Management expressed optimism about the ongoing contribution from these markets.
-
Cybersecurity incident response: DaVita’s operations faced disruption after a cyberattack in April, but management emphasized that dialysis care continued without interruption. Most major systems were restored quickly, and financial impacts are expected to be largely one-time costs recognized in the next quarter.
-
Capital allocation approach: The company accelerated share repurchases in the first part of the year, consistent with its ongoing strategy to invest in growth opportunities and return capital to shareholders. Management indicated that repurchase activity will slow for the balance of the year, maintaining its established allocation priorities.
Drivers of Future Performance
Management’s outlook for the remainder of the year is shaped by expectations for treatment volume recovery, evolving drug reimbursement, and potential policy changes affecting patient mix and profitability.
-
Volume recovery uncertainty: Management anticipates that treatment volumes will remain below initial projections for the year, primarily due to the lingering effects of the severe flu season and temporary admissions disruptions from the cyberattack. The company expects gradual volume improvement but does not provide a clear timeline for a return to 2% growth.
-
Phosphate binders’ impact: The ongoing integration of phosphate binders into the Medicare bundle is expected to support revenue per treatment, especially given the strong initial uptake of iron-based binders. Management believes this could provide incremental operating income at the upper end of its previously guided range, though variability in drug mix remains a risk.
-
Policy and reimbursement risks: The company remains vigilant about potential policy changes, such as the expiration of enhanced premium tax credits, which could cumulatively impact operating income over several years. Management is also monitoring evolving Medicaid and tariff policies, though it currently does not expect these to materially affect results.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be tracking (1) the pace of recovery in treatment volumes as the effects of the flu season and cyber incident subside, (2) continued progress on integrating phosphate binders into the reimbursement model and their impact on operating income, and (3) updates on international expansion, particularly in Latin America. Additionally, we will monitor any changes in healthcare policy or reimbursement that could influence patient mix and profitability.
DaVita currently trades at a forward P/E ratio of 11.8×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).
High Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
