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DaVita Inc DVA

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DaVita Shows Caution on Rest of 2021 and 2022; Maintaining FVE

Julie Utterback, CFA Senior Equity Analyst

Analyst Note

| Julie Utterback, CFA |

DaVita turned in strong third-quarter results, but shares traded lower after the market closed on management's trimmed 2021 outlook and caution on 2022, as excess mortality concerns accelerated in the quarter on the delta variant surge and labor costs rose. After trimming our expectations for 2021 a bit and 2022 significantly, including expected lobbying costs during the mid-term election year, we are keeping our $110 fair value estimate intact. Our fair value depends on business conditions normalizing in 2023 and beyond, and despite the near-term expected disruption, we continue to see significant intangible assets and cost advantages around DaVita's top-tier position in dialysis services, which informs our narrow moat rating.

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Company Profile

Business Description

DaVita is the largest provider of dialysis services in the United States, boasting market share that eclipses 35% when measured by both patients and clinics. The firm operates over 3,100 facilities worldwide, mostly in the U.S., and treats over 240,000 patients globally each year. Government payers dominate U.S. dialysis reimbursement. DaVita receives approximately 69% of U.S. sales at government ( primarily Medicare) reimbursement rates, with the remaining 31% coming from commercial insurers. However, while commercial insurers represented only about 10% of the U.S. patients treated, they represent nearly all of the profits generated by DaVita in the U.S. dialysis business.

2000 16th Street
Denver, CO, 80202
T +1 720 631-2100
Sector Healthcare
Industry Medical Care Facilities
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Slow Growth
Employees 67,000