DaVita Reports In-line

DaVita Inc. (DVA: 59.99 0.00 0.00%) reported fourth quarter fiscal 2009 net income of $109.7 million or $1.06 per share, which was in line with the Zacks Consensus Estimate. The company earned $98.4 million or 94 cents in the comparable quarter of 2008.

For full year 2009, DaVita earned $4.06 per share, in line with the Zacks Consensus Estimate but higher than the earnings of $3.53 in fiscal 2008. Net operating revenue for fiscal 2009 climbed approximately 8% to $6.11 billion from $5.66 billion in fiscal 2008.
 
Revenues for the quarter came in at $1.57 billion, which reflected approximately a 7.5% increase over the year-ago quarter. By segments, revenues from the Dialysis and related Lab Services segment for the quarter came in at $1.48 billion as against $1.39 billion in the prior-year quarter. Other ancillary services and strategic initiatives generated revenues of $85 million as against $72 million in the year-ago quarter. Highlights of the strong display in the reported quarter included consistent volume growth, stable private pricing and strong cash flows.
 
The kidney-care company operated or provided administrative services at 1,530 outpatient dialysis centers serving approximately 118,000 patients as of December 31, 2009.The company acquired 7 centers, opened 17 new centers, merged 5 centers and sold 1 center during the reported quarter.

Total treatments for the quarter came in at 4,360,638, or 55,198 treatments per day. This represented a per day increase of 5.2% over the year-ago quarter. The growth of non-acquired treatment in the quarter was 4.8%.
 
During the quarter, DaVita repurchased about 1.05 million shares of its common stock for $59.1 million. For full year 2009, DaVita purchased about 2.90 million shares at a cost of $153.5 million. All the transactions were completed pursuant to previously announced authorizations. However, DaVita announced that it has not yet bought any shares under the new $500 million authorization approved in November 2009.
 
DaVita’s operating cash flow for 2009 came in at $667 million and free cash flow stood at $485 million. For the reported quarter, operating cash flow came in at $153 million and free cash flow stood at $97 million.

The company’s effective tax rate was 35.5% in the reported quarter and 36.7% for 2009. The amount of third party owners’ income attributable to non-tax paying entities has impacted the effective tax rate. The effective tax rate attributable to DaVita in the quarter was 38.5% and 39.7% for fiscal 2009.
 
Outlook
 
DaVita 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 to $725 million in 2010. The Zacks Consensus EPS Estimate for 2010 is $4.38.
Estimate Revisions Trend

Over the last 30 days, only 1 of the 8 analysts covering the stock for the next quarter raised estimates while none moved in the opposite direction. The lack of directional pressure for the next quarter justifies our short-term recommendation reflected by Zacks Rank # 3 (Hold).

Furthermore, over the last 30 days, none of the 15 analysts covering the stock revised earnings estimates in either direction for full year 2010. Here too, the non-existent directional pressure on the performance of the stock in the upcoming quarters justifies our long-term “Neutral” recommendation on the stock.