Monday, August 20, 2012

DVA F2Q12 Earnings 8/01/12 - (Ryan Kennedy)

     For the second quarter of fiscal year 2012, DaVita Inc. (DVA) reported strong revenues and EPS, beating Wall Street estimates on both metrics. Revenues grew 16% over the second quarter of FY 2011 from $1.66bn to $1.93bn, and exceeded analyst expectations of $1.85bn. The revenue growth is largely attributable to increases in patient-treatment volumes, with volumes increasing 14% from 4.8mm to 5.5mm, of which 4.7% was organic.

     Excluding one-time items, operating income was $326mm compared to $271mm, an increase of 20%. DVA continues to make strides in profitability, decreasing patient care costs as a percentage of sales by 200 bps, from 70% to 68%. The company reported EPS of $1.49, slightly above Street expectations of $1.47, and an increase of $0.32 over the same period a year ago.

     Management raised guidance on FY 2012 operating income from $1,310mm to $1325mm. Going forward, we have strong conviction in DaVita. The company continues to improve financially, and has favorable long-term growth prospects. End Stage Renal Disease is expected to continue to grow due to demographic shifts and changes in living standards, and DaVita is poised to capture market share in the fragmented international markets.

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