DaVita Posts Strong Q4 Revenue, Misses Adjusted EPS Guidance
Key Financials
* Revenue: $3.29 billion (4.7% YoY growth)
* Adjusted EPS: $2.24 (4.3% beat)
* Adjusted EBITDA: $766.9 million (19.1% beat)
* Adjusted EPS guidance for FY2025: $10.75 (6.1% miss)
Key Events
DaVita Inc. (NYSE: DVA) reported better-than-expected revenue in Q4 CY2024, but its full-year adjusted EPS guidance fell short of analyst estimates. Despite revenue growth, the stock dropped 9.7% following the results.
Business Highlights
* Flat sales volumes year-over-year
* Operating margin improved to 17.2% (up from 12.4% in Q4 CY2023)
* Free cash flow margin increased to 11.4% (up from 10.4% in Q4 CY2023)
* CEO Javier Rodriguez: "Strong finish in 2024 despite challenges."
Industry Overview
* Outpatient and specialty care industry expected to grow due to aging populations and chronic disease prevalence
* Support from advancements in medical technology and focus on preventive care
* Headwinds include reimbursement cuts, labor shortages, and digitization costs
Growth Analysis
* Annualized revenue growth of 2.4% over the last five years
* Annualized revenue growth of 5.1% over the last two years
* Modest 4.7% revenue growth in Q4 CY2024 (0.9% beat)
* Projected 3.2% revenue growth over the next 12 months
Operating Performance
* Improved operating margin of 14.3% over the last five years
* Operating margin rose by 1.6 percentage points over the last five years
* Q4 CY2024 operating margin of 17.2% (up 4.8 percentage points year-over-year)
Earnings Per Share (EPS)
* Remarkable 11.9% compounded annual EPS growth over the last five years
* Q4 CY2024 EPS of $2.24 (4.3% beat)
* Projected $9.68 full-year EPS for 2025 (16.6% growth)
Conclusion
DaVita's mixed Q4 results raise questions about its valuation and investment potential. While revenue growth remains stable, the missed adjusted EPS guidance and flat sales volumes cast a shadow on the company's outlook. Investors should carefully consider these factors before making any investment decisions.