Zacks_Analysts' Blog : DaVita Acquires Stake in Indian Co. - Analyst Blog

Recently, DaVita Inc. (DVA) announced the purchase of a majority stake in NephroLife, an India-based kidney care company, in which the former already held a minority stake. However, the financial terms of the deal were not divulged.

NephroLife currently operates nine centers in Bangalore, India, offering dialysis service and vascular surgery, among other kidney care services. Subsequent to the acquisition, the company will be called DaVita NephroLife.

DaVita has always been focused on expanding domestically via acquisitions. Rapid inorganic growth aids DaVita by providing competitive advantage against arch rivals such as Gentiva Health Services Inc. (GTIV) and Quest Diagnostics Inc. (DGX).

However, recently the company seems inclined toward international expansion as well. As part of its international expansion strategy, DaVita aims to penetrate the rapidly developing Indian economy since it also provides ample opportunities for investment in the health care sector.

Previously, in November 2011, DaVita announced the acquisition of ExtraCorp AG by its wholly-owned subsidiary DV Care GmbH. ExtraCorp is a German company that owns and operates two dialysis centers in Salzgitter and Seesen and manages two other dialysis centers in Dresden and Freital.

DaVita also operates a dialysis center in Singapore besides signing an agreement to develop and operate various clinics in Malaysia. The company even owns a non-profit organization: Bridge of Life - DaVita Medical Missions, which has been involved in the trainings of kidney care professionals and opening of dialysis centers in the rural areas of India for several years.

Overall, we believe that the NephroLife acquisition is an important step in DaVita’s international expansion plans. It is not only expected to be accretive to the company’s earnings in the long term, but is also likely to pave way for further acquisitions and alliances in India.

Currently, the Zacks Consensus Estimate for DaVita’s fourth-quarter 2011 earnings is $1.48 per share, up about 31% from the year-ago quarter. None of the 12 analysts covering the stock revised their estimates in the last 30 days. For 2011 and 2012, the Zacks Consensus Estimate stands at $5.05 and $6.23 per share, respectively, up 15% and 23% year-over-year.

Currently, DaVita carries a Zacks #2 Rank (short-term Buy rating) along with a long-term Outperform recommendation.