DaVita Healthcare Partners, Inc. (DVA) is set to report second-quarter 2014 earnings results on Jul 31, 2014. Last quarter, it delivered an earnings surprise of –2.30%. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

DaVita Healthcare took a couple of initiatives in the last quarter that should help it to boost earnings. These include the company’s expansion in DeLand, FL and Malaysia, and the implementation of a molecular diagnostic testing by using technology from Roche Diagnostics.

However, DaVita Healthcare’s increased debt levels are a matter of concern and thus raises skepticism regarding an earnings beat in the quarter. The company has been issuing notes to refinance its existing indebtedness and the last quarter was also no exception. Such issuances immediately raise the interest expense, thereby weighing on company financials.

Earnings Whispers?

Our proven model does not conclusively show that DaVita Healthcare is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: DaVita Healthcare has an ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate both stand at 88 cents per share, making the difference 0.00%.

Zacks Rank: DaVita Healthcare’s Zacks Rank #3 (Hold) increases the predictive power of ESP, but when combined with a zero ESP, it makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some companies in the medical sector you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Gentiva Health Services Inc. (GTIV) has Earnings ESP of +37.50% and a Zacks Rank #1 (Strong Buy).

Wright Medical Group Inc. (WMGI) has Earnings ESP of +8.89% and a Zacks Rank #1.

Myriad Genetics Inc. (MYGN) has Earnings ESP of +4.35% and a Zacks Rank #3.

Read the Full Research Report on WMGI
Read the Full Research Report on DVA
Read the Full Research Report on MYGN
Read the Full Research Report on GTIV


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