DaVita Earnings Call Signals Cautious Optimism

Davita Healthcare ((DVA)) has held its Q4 earnings call. Read on for the main highlights of the call.

Positive momentum nudged DaVita’s latest earnings call into optimistic territory, as management balanced applauding clinical and financial strides with candid acknowledgment of lingering operational headaches such as elevated mortality, the long tail from a cyberattack, and accelerating patient-care costs. The tone conveyed confidence that targeted initiatives and disciplined capital management can keep results on track despite these near-term headwinds.

IKC Clinical Outcomes and Profitability

DaVita’s Integrated Kidney Care program grabbed the spotlight, boasting sharply better clinical outcomes—patients were 35% more likely to start dialysis with permanent access, incurred one-third the costs during the first 180 days, and saw fewer hospital stays thanks to over 10% higher adherence. Financially, IKC achieved its first profitable year, generating $22 million in adjusted operating income for 2025 (including $46 million in the fourth quarter), with management plotting a $20 million incremental contribution in 2026 even as growth moderates.

Strong Full-Year Financial Results

Core financials impressed: adjusted operating income reached $2.094 billion and EPS from continuing operations hit $10.78, while fourth-quarter figures logged $586 million and $3.40, respectively. Free cash flow topped $1 billion, underscoring continued strength in the dialysis franchise despite volume pressure, helping DaVita retain ample flexibility for reinvestment.

Revenue per Treatment Momentum

Revenue per treatment accelerated by roughly $12 sequentially in the fourth quarter, lifting full-year 2025 RPT to about $410, a 4.7% increase over 2024. This improvement is critical for offsetting cost inflation and soft treatment counts, and management is pushing for further mix upgrades even as it prepares for only modest 1%–2% RPT growth in 2026.

International Segment Performance

The international arm delivered $21 million in fourth-quarter adjusted operating income and $114 million for the year, aided by organic expansion and the integration of Latin American acquisitions. Executives expect this division to supply roughly 1% of enterprise adjusted operating income growth next year, giving the portfolio another diversification lever.

Balance Sheet and Capital Allocation Discipline

Capital deployment remained shareholder-friendly, with DaVita repurchasing nearly 13 million shares for $1.8 billion in 2025, including 2.7 million during the fourth quarter and another 1.7 million post quarter-end. The leverage ratio closed at 3.26x EBITDA—comfortably within the 3.0x–3.5x target—leaving room for continued buybacks and selective investments.

Elimination of Mozarc Losses and Strategic Investment

Management affirmed no further losses are expected from Mozarc, which should boost other income, and highlighted a roughly $200 million minority stake in Elara Caring alongside Ares. The bet aims to bolster home-based end-stage kidney care and reduce costly hospitalizations, while providing a modest earnings tailwind.

Clinical Initiatives to Improve Outcomes

Executives outlined a suite of clinical initiatives: pushing vaccination rates beyond 90%, encouraging GLP-1 adoption, deploying advanced dialysis technologies that could trim mortality by up to 20%, and teaming with Elara to cut missed treatments. The common thread is reducing mortality and stabilizing treatment volumes, which remain the core drag on growth.

Treatment Volume Pressure and Mortality Headwind

U.S. dialysis treatments slipped 20 basis points year over year in the fourth quarter and 1.1% for 2025, reflecting elevated mortality and a rise in missed treatments. Management is not assuming a mortality improvement in 2026, signaling that volume recovery may be slow despite operational fixes.

ACA Premium Tax Credit Expiration Headwind

The looming expiration of enhanced ACA premium tax credits is projected to slash about $40 million of revenue in 2026 (with $70 million and $10 million impacts following in subsequent years), fueling payer uncertainty and possible patient payment issues. Even though open enrollment was resilient, executives remain cautious about ongoing premium compliance once bills land.

Rising Patient Care Costs

Patient care cost per treatment climbed roughly $6 sequentially in the fourth quarter and ended the year 5.9% higher, near the upper end of guidance. Management attributes roughly half of the year-on-year spike to binder drugs newly included in bundled payments, with the rest tied to seasonal benefits and pricier supplies.

Guidance

DaVita’s 2026 playbook calls for adjusted operating income of $2.085 billion to $2.235 billion and EPS of $13.60 to $15.00, implying about 3% OI growth and a 33% profit jump at the midpoint. Free cash flow is pegged at $1.0 billion–$1.25 billion (before the $200 million Elara outlay), with first-quarter OI expected to be roughly one-fifth of the annual total. The outlook assumes flat U.S. treatment volumes, 1%–2% RPT growth, disciplined cost increases, incremental IKC and international contributions, lower debt expense, and ongoing share repurchases.

DaVita’s message to investors is clear: while mortality-related volume declines, cyber aftershocks, and payer turbulence remain real hazards, the company’s clinical achievements, disciplined capital deployment, and robust guidance underpin a cautiously optimistic trajectory for 2026.