DaVita's Stock Slump: Key Insights After Buffett's Move

Author: Addison Perry Updated: 02-14-2025 07:14 AM

Understanding DaVita's Recent Stock Performance

DaVita Inc. experienced a significant decline of 10.2% in pre-market trading after news broke about Berkshire Hathaway reducing its stake in the company. This event has raised eyebrows among investors and market watchers alike, as Berkshire has been a long-term investor in DaVita.

Recent Berkshire Hathaway Moves

Warren Buffett's Decision

Berkshire Hathaway, the investment vehicle led by Warren Buffett, recently sold approximately 45% of its shares in DaVita, which translates to about 203,091 shares. As a result, the company's shares are now valued at around $6.4 billion, a significant financial maneuver considering the conglomerate's longstanding relationship with the dialysis provider.

Impact of the Sale

This drastic measure came shortly after DaVita announced a weaker outlook for 2025. Despite strong Q4 earnings that surpassed market expectations, the forecast for full-year earnings per share (EPS) fell between $10.20 and $11.30, below the average estimate of $11.44. Investors are anxious, wondering if this is a sign of bigger issues within the company.

DaVita's Financial Performance

In light of the recent turmoil, it's important to note that DaVita posted stronger than expected fourth-quarter earnings and revenue figures. The company reported an adjusted EPS of $2.24, surpassing analyst predictions of $2.13, with revenues reaching $3.3 billion against expectations of $3.26 billion. This shows DaVita's potential, even as it deals with external pressures.

Company Leadership's Confidence

CEO Comments

CEO Javier Rodriguez expressed optimism about the company's future despite challenges faced in the previous year. He stated, “Despite a year with unique hurdles, we finished strong, producing full-year adjusted operating income and adjusted EPS in the top half of our guidance range.” He also mentioned that DaVita anticipates a normalization of supply dynamics in the upcoming quarter.

The Bigger Picture

The recent sale by Berkshire Hathaway is part of a broader share repurchase agreement. Under this agreement, DaVita is committed to buying back enough shares each quarter to maintain Berkshire’s stake at 45%. This illustrates the ongoing relationship and financial engagements between the two entities, established since 2011. The dynamics of this partnership will be crucial as DaVita moves forward.

Stock Price Analysis

DaVita's stock closed at $177.06, witnessing a notable increase of more than 43% over the previous year. However, the recent drop can shift investor sentiment rapidly. With shares dropping by over 10% in one day, vigilance is necessary for stakeholders.

Frequently Asked Questions

What caused DaVita's shares to drop significantly?

The drop in DaVita's shares was primarily due to Berkshire Hathaway reducing its stake in the company, coupled with a weaker outlook for 2025 reported by DaVita.

How did DaVita perform in its recent financial results?

Despite weakening projections, DaVita's fourth-quarter results exceeded expectations with an adjusted EPS of $2.24 and revenues of $3.3 billion.

What is the outlook for DaVita in 2025?

DaVita's outlook for 2025 anticipates an EPS range between $10.20 and $11.30, which is lower than the analyst consensus.

How has the market reacted to Berkshire’s decision?

The market has reacted negatively, reflecting investor concerns about DaVita’s future in light of recent developments.

What are the implications for investors?

Investors are advised to stay informed and closely monitor DaVita's performance as the market digests the implications of Berkshire Hathaway's reduced stake.

About The Author

Hello, I'm 30-year-old financial writer and expert Addison Perry, and I love to simplify the intricacies of the financial industry. I've committed myself over the years to deciphering the subtleties of investing techniques and economic trends and converting them into doable guidance that anybody can use. My goal with writings and books is to make money interesting and approachable so that readers may take charge of their financial futures.

My enthusiasm to empowerment and education has propelled me through my career in finance. I write because I think that everyone should be able to make educated financial decisions, and I try to provide that. Regardless of experience level with investing, my work is intended to provide insightful analysis and practical advice to enable you to thrive in the always changing financial environment. I appreciate you traveling with me toward success and financial literacy.

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