Denver, CO-based DaVita HealthCare Partners Inc DVA, a leading provider of dialysis services in the U.S. to patients suffering from chronic kidney failure, is expected to report first-quarter fiscal 2017 results on May 2, after market close.

Last quarter, the company reported earnings of 98 cents per share, which beat the Zacks Consensus Estimate of 91 cents. Meanwhile, over the last four trailing quarters, the company posted an average earnings beat of 4.4%.

Factors at Play

Steady overseas expansion through strategic alliances and acquisition of dialysis centers has played a key role in boosting growth for DaVita. In January, the company disclosed a new supply agreement with Amgen. The contract is a six-year one that is expected to provide ‘substantial savings’ from the beginning of the year. However, other specific terms (including pricing) of the agreement have been kept under wraps.

DaVita HealthCare Partners Inc. Price and EPS Surprise

 

DaVita HealthCare Partners Inc. Price and EPS Surprise | DaVita HealthCare Partners Inc. Quote

In Feb 2017, DaVita HealthCare Partners announced that HealthCare Partners, a unit within its medical group, has entered into a strategic partnership with Cigna. This is an impressive expansionary move in Los Angeles which is expected to yield accretive returns over the long haul. We believe DaVita’s constant efforts to upgrade its quality of services, global expansion and active acquisitions are key positives.

On the flipside, escalating expenses are a concern. Management expects significant decrease in operational income, especially in the pharmacy business, for fiscal 2017 as a whole. The company expects a hike in its dialysis and related lab services in the quarter, indicating probabilities of a rise in its general and administrative expenses.

DaVita’s plans to improve its information technology infrastructure and support certain regulatory compliance and legal matters are also likely to drive expenses in the quarter.

Price Performance & Estimate Revision Trend

DaVita has had an impressive run on the bourse over the last three months. The company gained roughly 6.5%, higher than the Zacks categorized Medical - Outpatient and Home Healthcare sub-industry’s addition of almost 3.1%.

Moreover, the current level compares favorably with the S&P 500’s return of 5.4% over the same time frame. This, together with a long-term expected earnings growth rate of 9.5%, instills confidence in investors.

Coming to estimate revisions, the Zacks Consensus Estimate for current quarter earnings has been stable at 82 cents per share over the last two months.