Let’s dig into the relative performance of DaVita (NYSE: DVA) and its peers as we unravel the now-completed Q3 outpatient & specialty care earnings season.

The outpatient and specialty care industry delivers targeted medical services in non-hospital settings that are often cost-effective compared to inpatient alternatives. This means that they are more desired as rising healthcare costs and ways to combat them become more and more top-of-mind. Outpatient and specialty care providers boast revenue streams that are stable due to the recurring nature of treatment for chronic conditions and long-term patient relationships. However, their reliance on government reimbursement programs like Medicare means stroke-of-the-pen risk. Additionally, scaling a network of facilities can be capital-intensive with uneven return profiles amid competition from integrated healthcare systems. Looking ahead, the industry is positioned to grow as demand for outpatient services expands, driven by aging populations, a rising prevalence of chronic diseases, and a shift toward value-based care models. Tailwinds include advancements in medical technology that support more complex procedures in outpatient settings and the increasing focus on preventive care, which can be aided by data and AI. However, headwinds such as reimbursement rate cuts, labor shortages, and the financial strain of digitization may temper growth.

The 7 outpatient & specialty care stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 0.9% while next quarter’s revenue guidance was in line.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 7.1% since the latest earnings results.

Weakest Q3: DaVita (NYSE: DVA)

With over 2,600 dialysis centers across the United States and a presence in 13 countries, DaVita (NYSE: DVA) operates a network of dialysis centers providing treatment and care for patients with chronic kidney disease and end-stage kidney disease.

DaVita reported revenues of $3.42 billion, up 4.8% year on year. This print was in line with analysts’ expectations, but overall, it was a slower quarter for the company with a significant miss of analysts’ EPS estimates and revenue in line with analysts’ estimates.

DaVita delivered the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is down 3.1% since reporting and currently trades at $122.62.

Read our full report on DaVita here, it’s free for active Edge members.

Best Q3: Select Medical (NYSE: SEM)

With a nationwide network spanning 46 states and over 2,700 healthcare facilities, Select Medical (NYSE: SEM) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States.

Select Medical reported revenues of $1.36 billion, up 7.2% year on year, outperforming analysts’ expectations by 2.7%. The business had a strong quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.

Select Medical pulled off the biggest analyst estimates beat among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 7.7% since reporting. It currently trades at $13.12.

Is now the time to buy Select Medical? Access our full analysis of the earnings results here, it’s free for active Edge members.

agilon health (NYSE: AGL)

Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE: AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.

agilon health reported revenues of $1.44 billion, down 1.1% year on year, exceeding analysts’ expectations by 1%. Still, it was a slower quarter as it posted full-year EBITDA guidance missing analysts’ expectations significantly and a significant miss of analysts’ EPS estimates.

agilon health delivered the slowest revenue growth in the group. The company added 5,000 customers to reach a total of 503,000. As expected, the stock is down 17.1% since the results and currently trades at $0.60.

Read our full analysis of agilon health’s results here.

Encompass Health (NYSE: EHC)

With a network of 161 specialized facilities across 37 states and Puerto Rico, Encompass Health (NYSE: EHC) operates inpatient rehabilitation hospitals that help patients recover from strokes, hip fractures, and other debilitating conditions.

Encompass Health reported revenues of $1.48 billion, up 9.4% year on year. This print met analysts’ expectations. Aside from that, it was a mixed quarter as it also produced a beat of analysts’ EPS estimates but a slight miss of analysts’ same-store sales estimates.

The stock is down 9.1% since reporting and currently trades at $114.29.

Read our full, actionable report on Encompass Health here, it’s free for active Edge members.

Surgery Partners (NASDAQ: SGRY)

With more than 180 locations across 33 states serving as alternatives to traditional hospital settings, Surgery Partners (NASDAQ: SGRY) operates a national network of outpatient surgical facilities including ambulatory surgery centers and short-stay surgical hospitals.

Surgery Partners reported revenues of $821.5 million, up 6.6% year on year. This result was in line with analysts’ expectations. However, it was a slower quarter as it logged a significant miss of analysts’ EPS estimates and full-year revenue guidance missing analysts’ expectations.

Surgery Partners had the weakest full-year guidance update among its peers. The stock is down 28.6% since reporting and currently trades at $15.36.

Read our full, actionable report on Surgery Partners here, it’s free for active Edge members.

Market Update

As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.

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