DaVita Reports in Line – Analyst Blog

DaVita Inc. (DVA) reported first quarter fiscal 2010 net income of $109.4 million, or $1.04 per share, which was in line with the Zacks Consensus Estimate. The company earned $96.2 million or 92 cents per share in the comparable quarter of 2009.

 

Net operating revenues for the reported quarter climbed 7.6% year-over-year to $1.56 billion. Segment wise, revenues from the Dialysis and related Lab Services segment for the quarter came in at $1.48 billion as against $1.38 billion in the prior-year quarter. Operating income for the segment increased to $253 million in the reported quarter from $237 million in the year-ago quarter.

 

Other – Ancillary services and strategic initiatives generated revenues of $81 million as against $71 million in the year-ago quarter. The segment suffered an operating loss of $2 million in the reported quarter as against a loss of $5 million in the year-ago quarter. The company’s quarterly consolidated operating income climbed approximately 10% year-over-year to $243 million.

 

Operating income margin for the reported quarter stood at 15.6% as opposed to15.2% in the year-ago quarter. Total operating expenses and charges for the quarter climbed 7.3% year-over-year to $1.32 billion.

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The kidney-care company provided administrative services across 1,544 outpatient dialysis centers serving approximately 119,000 patients as of March 31, 2010. The company acquired 1 center, opened 21 new centers, closed 5 centers and sold 3 centers during the reported quarter.

 

Total treatments for the reported quarter came in at approximately 4.3 million. This represents a per day increase of 4.5% over the year-ago quarter. The growth of non-acquired treatment in the quarter stood at 4.2%.

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DaVita‘s operating cash flow stood at $794 million for the rolling twelve months ended March 31, 2010 and free cash flow stood at $616 million. For the reported quarter, operating cash flow came in at $262 million and free cash flow stood at $221 million. The total debt for the reported quarter came down to $3.61 billion from $3.68 billion in the year-ago period.

 

Capital expenditures from Routine maintenance for the reported quarter came in at $22.6 million as opposed to $31.2 million in the year-ago quarter, down 27.6%. Development and relocations expenditure in the reported quarter dropped 45.7% year-over-year to $22.8 million, and acquisition expenditures plummeted to $1.1 million from $39.8 million in the year-ago quarter.

 

The company’s effective tax rate was 37.2% in the reported quarter. The third party owners’ income attributable to non-tax paying entities impacted the effective tax rate. The effective tax rate attributable to DaVita in the reported quarter was 40.25%.

 

 

DaVita re-affirmed its earlier guidance for 2010 operating income and operating cash flows. The company forecasts operating income in the range of $950 million to $1.02 billion in 2010. Furthermore, operating cash flows for 2010 are expected between $675 million and $725 million in 2010.

 

 

Currently we are Neutral on DaVita. Our long-term Neutral recommendation on the stock indicates that it is expected to perform in line with the broader U.S. equity market over the next six to twelve months. We advise investors to retain the stock over this time period.