After market close yesterday, DaVita Inc. (DVA) reported second quarter net income of $105.8 million or $1.02 per share, which was better than the Zacks Consensus Estimate of 95 cents. The company reported a net income of $95.0 million or 90 cents per share in the comparable quarter of 2008.
Net operating revenues for the quarter were $1.52 billion, which reflected an 8% increase over the year-ago quarter. Highlights of the strong display in the reported quarter included consistent volume growth, stable private pricing and strong cash flows.

Total treatments for the quarter were 4,228,179, or 54,207 treatments per day, representing a per day increase of 5.2% over the year-ago quarter. Non-acquired treatment growth in the quarter was 4.5% over the prior year’s second quarter. The company expects non-acquired growth to be around 4% for the year.

The largest provider of dialysis services to patients suffering from End-Stage Renal Disease (ESRD) reported a $3.62 increase per treatment from the first quarter of 2009. An increase in physician-prescribed pharmaceuticals coupled with a rise in drug reimbursement rates based on average sales price contributed to this increase.
There was an increase of about $3 per treatment in dialysis operating costs year-over-year. This is a reflection of solid cost controls being offset by annual wage inflation and higher pharma costs.
DaVita is in sound financial health. It exited the quarter with operating cash flow of $212 million, out of which $173.5 million represented free cash flow. DaVita narrowed its operating income guidance to $900 million – $930 million from its prior guidance of $870 million – $930 million. It expects operating cash flow to lie between $550 million and $600 million.

The narrower operating income guidance reflects the risk of a significant decline in the number of private patients due to high unemployment rates coupled with the risk of cuts from government programs, who are themselves on the lookout for budget relief.
We expect DaVita to continue delivering solid results in the coming quarters, generating steady growth and consistent cash flows. The better-than-expected results caused a 2% rise in DaVita shares in after-hours trading.
Read the full analyst report on “DVA”
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