Berkshire Hathaway cuts stake in DaVita amid rising care costs

In the United States, DaVita, a provider of dialysis services, experienced a significant drop in its stock value after it presented an unfavorable financial outlook. On February 14, 2025, the company's shares fell more than 12% following an announcement of earnings projections for 2025, predicting adjusted profit per share to be between $10.20 and $11.30. This forecast was notably lower than the analysts' average expectation of $11.24 per share. The disappointing guidance was attributed to the escalating costs associated with patient care, including closure costs of its dialysis centers and rising health benefit expenses. During the fourth quarter, DaVita reported financial challenges, including a $24.2 million charge linked to the closure of dialysis centers within the U.S. Despite these setbacks, the company managed to exceed analysts' expectations in the fourth-quarter earning metrics, reporting an adjusted earnings per share of $2.24, compared to the anticipated $2.13. This dichotomy between disappointing guidance and better-than-expected earnings illustrates the challenging landscape DaVita faces in the health-care sector, primarily related to rising operational costs and market pressures. Additionally, DaVita's largest institutional investor, Berkshire Hathaway, announced the sale of 203,091 shares on February 10, 2025, reducing its ownership stake to 45%, a configuration worth nearly $6.4 billion. The divestment was part of a preplanned share repurchase agreement established in April 2024 when Berkshire agreed to periodically reduce its significant stake in the company quarterly. This sale comes as DaVita is grappling with financial pressures, reflective of broader healthcare industry challenges. Berkshire Hathaway's involvement in DaVita started back in 2011, and as of the end of September 2024, DaVita was recorded as its 10th largest equity holding. The ongoing adjustments to Berkshire's stake indicate a more cautious approach toward investing in DaVita amidst its recent financial struggles. The overall scenario paints a picture of concern not only for DaVita's immediate future but also highlights potential impacts on investor confidence in the healthcare sector, particularly for companies reliant on high operational and care costs.