Company Reports

After selling DaVita Medical Group in 2019, DaVita focuses on providing services to end-stage renal disease, or ESRD, patients primarily in the United States, although its international footprint is expanding organically and through acquisitions. Over several decades, DaVita has built one of the largest networks of dialysis clinics in the US, and although covid-related mortality and labor pressures cut into its profits in recent years, we see brighter days ahead for the firm, despite long-term potential challenges emerging related to the expansion of obesity drugs.

DaVita reported second-quarter results with 5% revenue growth, 5% adjusted operating profit growth, and 36% adjusted EPS growth, with significant debt-funded share repurchase activity. Management also maintained the 2026 outlook, including adjusted EPS of $14.10-$15.20.

After selling DaVita Medical Group in 2019, DaVita focuses on providing services to end-stage renal disease, or ESRD, patients primarily in the United States, although its international footprint is expanding organically and through acquisitions. Over several decades, DaVita has built one of the largest networks of dialysis clinics in the US, and although covid-related mortality and labor pressures cut into its profits in recent years, we see brighter days ahead for the firm, despite long-term potential challenges emerging related to the expansion of obesity drugs.

After hours on May 5, DaVita turned in first-quarter results that included 6% revenue growth, 10% adjusted operating profit growth, and 44% adjusted EPS growth. The company also increased its operating profit and adjusted EPS outlook for 2026. Shares initially rose 4% on this news.

After selling DaVita Medical Group in 2019, DaVita focuses on providing services to end-stage renal disease, or ESRD, patients primarily in the United States, although its international footprint is expanding organically and through acquisitions. Over several decades, DaVita has built the largest network of dialysis clinics in the US, and although covid-19-related mortality and labor pressures cut into its profits in recent years, we see brighter days ahead for the firm, despite long-term potential challenges emerging related to the expansion of obesity drugs.

DaVita delivered 10% net revenue growth and 52% adjusted EPS growth in the fourth quarter. Management also gave its initial outlook for 2026 that included 26%-39% adjusted EPS growth to $13.60-$15.00.

In the third quarter, dialysis service provider DaVita grew revenue by 5%, but its adjusted EPS declined 3% year over year, despite major share repurchase activities in recent months. The company kept its 2025 roughly guidance intact, though, just narrowing some ranges.

In the second quarter, dialysis service provider DaVita increased revenue 6%, adjusted operating income 9% (above its 3%-7% long-term goal), and adjusted earnings per share 14% year over year. The company also kept its 2025 guidance intact.

In the quarter, DaVita showed revenue growth of 5%, but adjusted earnings per share declined 12% on elevated costs per patient, including pharmaceutical costs. With the help of share repurchases and other controls, DaVita kept its outlook for adjusted EPS and free cash flow intact for the full year.

Over the past week, tariff-related news has created significant volatility in the US market, including in medical services-related firms like managed care organizations, caregivers, and medical suppliers.

After selling DaVita Medical Group in 2019, DaVita has focused on providing services to end-stage renal disease, or ESRD, patients primarily in the United States, although its international footprint is expanding organically and through acquisitions. Over several decades, DaVita has built the largest network of dialysis clinics in the US, and although covid-19-related mortality and labor pressures cut into its profits in recent years, we see brighter days ahead for the firm, despite long-term potential challenges emerging on the obesity drug front.

In the fourth quarter, DaVita delivered growth in revenue and adjusted EPS of 5% and 20%, respectively, allowing DaVita to meet the top end of management's guidance ranges in 2024.

After selling DaVita Medical Group in 2019, DaVita has focused on providing services to end-stage renal disease, or ESRD, patients primarily in the United States, although its international footprint is expanding organically and through acquisitions. Over several decades, DaVita has built the largest network of dialysis clinics in the US, and although covid-19-related mortality and labor pressures cut into its profits in recent years, we see brighter days ahead for the firm despite some challenges emerging on the obesity drug front.

Higher rates on new debt pressured narrow-moat DaVita's third-quarter results, but DaVita maintained its 2024 operating outlook and gave an initial view for 2025 that included adjusted operating income growth returning to prepandemic norms of 3% to 7%. Our near-term expectations appear roughly in line with that view, and we are keeping our $134 fair value estimate intact. While DaVita shares still appear overvalued to us, shares are retreating closer toward our fair value after this call.

Narrow-moat DaVita turned in solid second-quarter results, and management bumped up its bottom-line expectations slightly. To reflect those mildly higher near-term expectations and recent cash flows, we are raising our fair value estimate on DaVita to $134 per share from $122.

After selling DaVita Medical Group in 2019, DaVita has focused on providing services to end-stage renal disease, or ESRD, patients primarily in the United States, although its international footprint is expanding organically and through acquisitions. Over several decades, DaVita has built the largest network of dialysis clinics in the US, and although covid-19-related mortality and labor pressures cut into its profits in recent years, we see brighter days ahead for the firm despite some challenges emerging on the obesity drug front.

After selling DaVita Medical Group in 2019, DaVita focuses almost exclusively on providing services to end-stage renal disease, or ESRD, patients primarily in the United States, although its international footprint is expanding organically and through acquisitions. Over several decades, DaVita has built the largest network of dialysis clinics in the US, and although covid-19-related mortality and labor pressures cut into its profits in recent years, we see brighter days ahead for the firm, despite some challenges emerging on the obesity drug front.

Narrow-moat DaVita turned in strong first-quarter results, and management mildly bumped up its bottom-line expectations, including recent share repurchases that we suspect were value-neutral for long-term shareholders. However, its free cash flow guidance hasn't changed. Since free cash flow is the main driver of our valuation methodology and our 2024 assumption for free cash flow remains within management's guidance range, we don't anticipate changing our $122 fair value estimate, at first glance.

GLP-1 drug use is increasing materially in patients with diabetes and obesity, and uncertainty around GLP-1 expansion has added risk to dialysis stocks even as pandemic challenges, including excess mortality and labor costs, are easing for the narrow moat dialysis companies we cover—Baxter, DaVita, Fresenius Medical Care, and Fresenius SE. Despite the concerns, new data rolling in on GLP-1s appears roughly in line with our view that GLP-1 expansion should not materially affect dialysis demand for at least the next decade, as mildly extended kidney disease progression to dialysis may be largely offset by cardiac and first-year survival, or "crash," benefits. Considering this roughly neutral outlook, we find the significant discounts to fair value in dialysis-related stocks compelling.

Shares of dialysis-related narrow-moat companies Baxter, DaVita, Fresenius Medical Care, and Fresenius SE rose materially on news from a kidney-related trial of Novo Nordisk's obesity drug Ozempic (semaglutide). Similar to the 20% reduction in cardiac events seen in another trial for semaglutide (Novo Nordisk's Wegovy) in 2023, Ozempic was found to reduce the risk of major kidney disease-related events by 24%, including cardiac events, deaths, and kidney disease progression. Dialysis investors appear relieved that the reduction in all of those events wasn't much larger than the cardiac event benefits already seen in recent trials, suggesting that GLP-1s like semaglutide probably are not ushering in a paradigm shift in kidney disease progression. Baxter, Fresenius Medical Care, and Fresenius SE all trade at material discounts to our fair value estimates even after their shares' rise in early trading March 5.