DaVita Inc. (DVA) had a very good Tuesday. The kidney care provider's stock rocketed more than 21% after reporting fourth-quarter results that beat expectations and offering a 2026 outlook that has analysts recalibrating their models.
The Numbers Tell a Strong Story
DaVita posted adjusted earnings of $3.40 per share, comfortably ahead of the $3.16 consensus estimate. Revenue came in at $3.62 billion, up 5.8% year over year and above expectations of $3.497 billion.
Here's what's particularly interesting: revenue per treatment jumped from $410.59 to $422.60. That's not a small move, and it reflects several positive trends. In the most recent quarter, the company benefited from increases in average reimbursement rates, some favorable patient mix shifts, and even a seasonal boost from flu vaccines.
Looking at the full year, the revenue per treatment gains were driven by something more structural. Phosphate binders are now incorporated into the ESRD Prospective Payment System bundle, and Medicare's annual base rate increases are flowing through. These aren't one-time windfalls but rather ongoing tailwinds.
On the volume side, DaVita performed 7,264,520 total U.S. dialysis treatments in the fourth quarter, averaging 91,608 treatments per day. That represented a slight 0.1% decline per day compared to the third quarter. Normalized non-acquired treatment growth was down 0.6% compared to the prior-year quarter, but the company seems comfortable that volumes have stabilized.
Patient care costs per treatment did tick up from $273.54 to $279.60, primarily because of higher health benefit expenses and medical supply costs. But the revenue gains more than offset those increases.
The 2026 Outlook Is the Real Surprise
DaVita expects fiscal 2026 adjusted earnings between $13.60 and $15.00 per share. That's well above the Street's $12.65 consensus. Adjusted operating income is projected at $2.09 billion to $2.24 billion.
Management is assuming treatment volumes will be roughly flat compared to 2025, which honestly seems conservative given the aging U.S. population and chronic kidney disease trends. Revenue per treatment is expected to grow 1% to 2%, while cost growth should land between 1.25% and 2.25%.
CFO Joel Ackerman provided some helpful context on the earnings call. The company faces an estimated $40 million headwind from the expiration of enhanced premium tax credits for exchange plans. However, that's largely offset by the elimination of a $45 million headwind from last year's cyber incident, which is now in the rearview mirror.
Strategic Investment in Home Health
In a simultaneous announcement, DaVita revealed it's making a minority investment in Elara Caring, a provider of home health, hospice, behavioral health, and personal care services. Ares' Private Equity Group is also participating in the approximately $200 million investment round.
Ackerman noted that this investment is expected to contribute positively to other income lines. The transaction should close later in 2026, giving DaVita a foothold in the growing home-based care market.
Wall Street Reacts
Barclays maintains an Equal-Weight rating on DaVita but raised its price target from $143 to $158, reflecting the improved earnings trajectory.
DVA stock closed up 21.69% at $135.31 on Tuesday, a clear vote of confidence from investors who like what they're seeing in both the near-term results and longer-term guidance.
