Today’s news:
• DaVita (DVA) reported third-quarter results.
• Mosaic (MOS) reported third-quarter results.
• Voya Financial (VOYA) reported third-quarter results.
DaVita Inc. (DVA) reported third-quarter adjusted net income from continuing operations of $1.53 per share yesterday afternoon vs. the $1.23 consensus estimate, and above all analysts’ estimates. Revenue was $2.904 billion vs. the consensus estimate of $2.8 billion. Importantly, DaVita guided Wall Street higher on expectations of full-year 2019 adjusted operating income and operating cash flow, lower on capital expenditures and higher on full-year 2020 adjusted earnings per share. The company repurchased 30.6 million shares of stock during the quarter at a cost of $1.75 billion. The Board of Directors then terminated any remaining share repurchase authorizations and authorized a new $2 billion repurchase.
DaVita is the largest provider of kidney care services and home dialysis in the U.S. During the quarter, DaVita opened a total of 25 new dialysis centers, acquired four dialysis centers and closed 15 dialysis centers, globally. DaVita’s U.S. operations performed 97,129 dialysis treatments per day.
DVA is an undervalued, mid-cap growth stock. The stock rose 6.3% to 66.39 in after-hours trading yesterday. There’s price resistance at 75 and again near 80, which is the maximum upside I would expect in the coming months, barring any unexpected M&A activity. Strong Buy.
The Mosaic Company (MOS – yield 0.9%) reported third-quarter adjusted EPS of $0.08 this week, missing the $0.24 consensus estimate. A tax accrual impacted profits by $0.10 per share and legal reserves lowered profits by $0.02 per share. The press release and conference call delivered a wide variety of positive and negative results and actions.
• Gross profit came in way above expectations for Potash, moderately above for Fertilizantes, and below for Phosphate.
• Management expects a shortened but aggressive U.S. fall fertilizer application season. (You may recall the horrendous flooding and continued rains in the U.S. in the first half of 2019 that seriously impacted many industries, including crops and agricultural chemicals. Soils were depleted of nutrients, likely creating a strong demand for Mosaic’s products in the coming months.)
• As planting resumes, U.S. crop yields are expected to remain lower than normal, thus supporting fertilizer pricing.
• The company will decrease fourth-quarter phosphate and potash production due to lower year-end demand and high current levels of U.S. potash inventory.
• In 2020, phosphate prices, which move quickly, are expected to rise as demand rises in the U.S. and remains strong in Brazil. In addition, China is cutting back on phosphate production due to pollution issues, which should support phosphate pricing.
• The company continues to benefit from operational improvements, cost reductions, and sources of additional revenue.
• The company repurchased $150 million of stock year-to-date.
• The company expects lower capital expenditures in the fourth quarter.
• Mosaic dramatically lowered full-year 2019 EPS guidance to $0.50-$0.60.
• The Esterhazy K3 mine project timetable is now accelerated by a full year vs. previous estimates, and is expected to significantly lower production costs by mid-2022.
Mosaic is the world’s largest producer of finished phosphate and potash. Full-year profits are expected to fall in 2019 and then to surge in 2020. The stock reacted quite well to the quarter’s results, most likely because investors are focused on the imminent rebound in crop planting and fertilizer demand. MOS could rise to short-term price resistance at 25 in the coming weeks, with additional gains in 2020 as future quarterly results deliver improved revenue and profits. Buy.
Voya Financial (VOYA – yield 1.1%) reported third-quarter normalized adjusted operating EPS of $1.36 yesterday afternoon vs. the consensus estimate of $1.40. The company achieved growth in each of its core businesses: Retirement, Investment Management and Employee Benefits. Voya prioritizes share repurchases and dividends with excess cash flow. The company repurchased $936 million of stock in 2019 through September, and has now authorized another $800 million stock buyback. The outstanding diluted share count was reduced by 12.2% in the last 12 months.
CEO Rodney O. Martin, Jr. said, “We fully expect to achieve our target of at least 10% annual adjusted operating earnings per share growth, on a normalized basis, in 2019,” a goal that additionally extends into 2020 and 2021. This bullish statement, combined with data provided in the press release, indicates that fourth-quarter EPS will come in above the current consensus estimate.
I’ve had a Hold recommendation on the stock because I’m waiting to review the revised 2020 EPS growth projections, subsequent to third-quarter results. In the meantime, the price chart remains bullish. I expect the stock to react well this week. Hold.