DaVita Inc. (DVA Quick QuoteDVA - Free Report) is scheduled to report second-quarter 2025 results on Aug. 5, after the closing bell.

In the last reported quarter, the company’s earnings per share (EPS) of $2.00 beat the Zacks Consensus Estimate by 14.3%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on three occasions and missed once, delivering an earnings surprise of 3.6%, on average.

Let’s check out the factors that have shaped DVA’s performance prior to this announcement.

Factors Likely to Affect DaVita

On first-quarter 2025 earnings call in May, DaVita’s management confirmed that its performance was partially driven by strength in phosphate binders (oral drugs prescribed to help dialysis patients avoid mineral bone disease). Beginning this year, the Centers for Medicare & Medicaid Services (CMS) has been transitioning phosphate binders from Medicare Part D into the dialysis benefit. DaVita is currently dispensing these drugs for physician orders and receiving reimbursement from CMS and Medicare Advantage plans on a per script basis during the initial TDAPA period. We expect DVA to have continued to benefit from this momentum during the second quarter of 2025, thereby driving up revenues.

However, DaVita is likely to have continued to witness weakness in new patient starts as it was negatively impacted by supply constraints of its peritoneal dialysis (PD) solutions during the fourth quarter of 2024. Management expects this to negatively impact volume growth in 2025. These factors are likely to have continued to weigh on the to-be-reported quarter’s performance, raising our apprehension.

DVA’s Estimate Picture

For second-quarter 2025, the Zacks Consensus Estimate for revenues is pegged at $3.30 billion, implying an improvement of 3.5% from the prior-year quarter’s reported figure.

The consensus estimate for EPS is pegged at $2.70, indicating an uptick of 4.3% from the prior-year period’s reported number.

What Our Model Suggests About DaVita

Our proven model predicts an earnings beat for DVA this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: DaVita has an Earnings ESP of +6.67%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

DVA’s Share Price Performance

Over the past three months, DaVita’s shares have gained 1.1%, outperforming Medical - Outpatient and Home Healthcare’s 2.8% decline. DVA’s shares also outperformed the Zacks Medical sector’s decrease of 1.6%, but underperformed the S&P 500’s growth of 13.9%.

Three Months Price Comparison

Image Source: Zacks Investment Research

DaVita’s peers like Aveanna Healthcare Holdings Inc. (AVAH Quick QuoteAVAH - Free Report) and Encompass Health Corporation (EHC Quick QuoteEHC - Free Report) have underperformed the company, while Elanco Animal Health Incorporated (ELAN Quick QuoteELAN - Free Report) has outperformed it. AVAH, EHC and ELAN’s shares are down 10.7%, down 4.9% and up 49.3%, respectively, in the same time frame.

DaVita’s Key Valuation Metric

From a valuation standpoint, DVA’s forward 12-month price-to-sales (P/S) is 0.8X, a discount to the industry's average of 2.6X.

Image Source: Zacks Investment Research

The company is trading at a discount to its peers, Encompass Health and Elanco Animal Health. However, DaVita is trading at a premium to its peer, Aveanna Healthcare. Encompass Health and Elanco Animal Health’s P/S currently stand at 1.8X and 1.5X, respectively, while the ratio for Aveanna Healthcare stands at 0.3X.

This suggests that investors may be paying a lower price relative to the company's expected sales growth.

DVA’s Long-Term Investment Visibility

On the first quarter of 2025 earnings call, DaVita’s management stated that, as predicted during the fourth quarter of 2024, the largest source of variability in the quarter would be in drug mix, where higher-than-expected prescriptions of iron-based binders have been seen. DVA is still in the early days of this transition and expects further variability over the year. With initial data on drug mix, management now expects the full-year operating income contribution from phosphate binders to be at the upper end of DaVita’s previous guidance range of zero to positive $50 million.

However, management’s expectations that its inability to start new patients on PD, leading to lower new admits in fourth-quarter 2024 and the related negative impact of volume growth in 2025 raise our apprehension.

Our Final Take on DaVita

There is no denying that DaVita sits favorably in terms of core business strength, earnings prowess, robust financial footing and global opportunities. The stock’s strong core growth prospects are a good reason for existing investors to retain shares for potential future gains.

For those exploring to make new additions to their portfolios, the valuation indicates expectations of superior performance compared with its industry and sector peers. However, as it is still valued lower than the broader market, it suggests potential room for growth if it can align more closely with overall market performance. As there are chances of beating estimates, it would be a wise choice to add the stock to one’s portfolio before the earnings. However, if investors are already holding the stock, it would be prudent to hold on to it at present.