DaVita misses quarterly profit estimates on rising costs, lower volumes

DaVita (DVA.N) missed third-quarter profit estimates, reporting adjusted earnings of $2.51 per share against an expected $3.23, and revenue of $3.42 billion, slightly below forecasts. The underperformance was primarily driven by rising patient care costs, a 0.5% decline in average daily U.S. dialysis treatments, increased general and administrative expenses due to IT, and $11.7 million in costs related to an April ransomware attack. Despite these headwinds, the company raised the lower end of its full-year 2025 adjusted profit forecast, though shares were down approximately 2% in extended trading.

Analysis

DaVita (DVA.N) reported a significant third-quarter profit miss, with adjusted earnings per share of $2.51 falling well short of analysts' average estimate of $3.23. Revenue of $3.42 billion also came in just shy of expectations, indicating broader operational challenges. This underperformance was primarily driven by a nearly 6% year-over-year increase in patient care costs per treatment, reaching $271.23, largely due to pharmaceutical and compensation expenses.

Compounding cost pressures, the company experienced declining treatment volumes, with average daily U.S. dialysis treatments falling 0.5% quarter-over-quarter to 91,680 and normalized non-acquired treatment growth declining 0.6% year-over-year. Furthermore, general and administrative expenses rose by $10 million from the prior quarter to $322 million, primarily due to IT-related costs, which included an $11.7 million charge for remediation efforts following an April ransomware attack.

Despite these immediate headwinds, DaVita raised the lower end of its full-year 2025 adjusted per-share profit forecast to $10.35-$11.15, up from its previous expectation of $10.20-$11.30. This forward guidance suggests management anticipates some stabilization or improvement beyond the current quarter's challenges. However, the market reacted negatively, with shares declining approximately 2% in extended trading, reflecting the moderately negative sentiment surrounding the Q3 results.

Key Decisions for Investors

• Investors should closely monitor DaVita's ability to manage escalating patient care costs and stabilize treatment volumes, as these are critical drivers of profitability.
• A cautious stance may be warranted given the Q3 profit miss and ongoing cost pressures, despite the slightly raised 2025 guidance.
• Future disclosures regarding the financial impact and resolution of cybersecurity incidents should be carefully evaluated for potential ongoing risks.