DVA - DaVita falls as labor headwinds weigh on 2023 outlook

DaVita ( NYSE: DVA ) was a notable underperformer in the S&P 500 on Thursday as the dialysis services provider slightly missed Q4 revenue estimates and issued in-line guidance amid ongoing labor challenges.

While the company's quarterly adj. diluted earnings per share at $1.11 exceeded expectations, the full-year adj. diluted EPS stood at $6.60 compared to $6.20 - $6.70 in its October forecast.

However, Q4 revenue of $2.92B fell short of $2.93B in Street estimates, indicating a ~1% YoY decline as revenue per treatment held steady at $366.30, and the operating margin reached ~9% from ~11% in the prior year quarter despite an improvement in labor costs.

"The primary driver of our fourth quarter performance coming in at the high end of our range was improvement in labor cost," chief executive Javier Rodriguez remarked.

"Despite early optimism for improvement in 2023, the labor markets remain highly dynamic and will remain a key swing factor in our performance," he noted during the earnings call.

Due to ongoing challenges in the labor market, Rodriguez estimates the 2023 labor contract costs to rise $20M – $40M from pre-COVID levels, which he said "will be a significant improvement to 2022."

DaVita ( DVA ) projects its adj. EPS and operating income to reach $5.45 – $6.95 and $1.40B – $1.60B this year, in line with $6.65 and $1.45B in the consensus, respectively.

Read: Moon Capital Management sees ~$100 fair value for DVA, noting it stands 50% above the firm's purchase price and indicates the level where the stock was trading as recently as seven months ago.

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