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Fresenius Medical (FMS) Q1 Earnings Beat, Operating Margin Up
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Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) reported first-quarter 2024 adjusted earnings per share (EPS) of 36 cents, which beat the Zacks Consensus Estimate of 26 cents by 38.5%. The bottom line improved 28.6% year over year.
Revenue Details
Revenues of $5.13 billion (EUR 4,725 million) missed the Zacks Consensus Estimate by 0.3%. However, the company’s reported revenues were up 0.4 year over year and 2.5% at constant currency (cc).
Segmental Details
Fresenius Medical implemented a new operating model during the first quarter and started reporting under two new segments, Care Delivery and Care Enablement. Previously, the company reported under the Health Care Products and Health Care Services segments. The Care Delivery segment primarily consists of products earlier reported under Health Care Services.
Care Delivery
The segment’s revenues were flat on a year-over-year basis but gained 8% at cc and 2% on an organic basis.
Revenues in the U.S. markets gained 3% reportedly, 5% at cc and 6% on an organic basis. Sales were driven by value-based care business growth, reimbursement rate increases and a favorable payor mix, partially hurt by missed treatments due to adverse first-quarter weather events, an unusually mild 2023 flu season and capacity constraints in clinics.
FMS stated that the annualization effect of COVID-related excess mortality in the late-stage chronic kidney disease and end-stage renal disease population continues to hurt treatment growth in the U.S. market, albeit at a slower pace.
International sales declined 9% reportedly and 4% at cc but gained 4% on an organic basis. A negative exchange rate effect was partially offset by organic growth.
Care Enablement
The segment’s revenues decreased 1% year over year, but rose 1% at cc and 2% on an organic basis. A negative exchange rate effect and negative volume growth were partially offset by the positive impacts of improved pricing.
Fresenius Medical Care AG & Co. KGaA Price, Consensus and EPS Surprise
Operating income, excluding special items and U.S. Provider Relief Funding, was up 23% from the prior-year quarter. The figure also rose 23% at cc. Operating margin, excluding the aforementioned items, was 8.6%, up 130 bps from the year-ago quarter’s actuals.
2024 Outlook
Fresenius Medical maintained its outlook for revenues in 2024. The company expects revenues to grow at a low-to-mid single-digit percentage rate. The operating income is estimated to grow at a mid to high-teens percentage rate.
Summing Up
FMS exited the first quarter on a strong note, with its earnings reflecting strong organic growth on the back of improving treatment volumes as well as a stabilizing labor environment in the United States. Continued improvement in these two key factors will be beneficial for the company in 2024. Overall price improvements also supported growth in the Care Enablement segment. However, a weak flu season will likely continue to have a negative impact on sales .
Meanwhile, FMS’ newly implemented operating model led to operational improvements. The bottom line was hurt by inflationary cost increases in energy, material and personnel. These headwinds are likely to improve over the year, which is also reflected in the company’s operating outlook.
In 2023, FMS generated 346 million euros in savings by implementing initiatives under its FME25 transformation program. The figure beat the company’s target of 250-300 million euros. Fresenius Medical expects to save 650 million euros by 2025 end. These savings are likely to continue to improve the operating margin going forward.
The company’s continued divestment of its noncore and dilutive assets seems promising as it will help focus on its core and growing categories as well as boost its cash resources.
Despite mixed results, shares of Fresenius Medical gained 2.6% in pre-market trading. So far this year, the company’s shares have lost 3.4% against the industry’s 5.3% growth. The S&P 500 increased 9.1% in the same time frame.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Fresenius Medical currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. (ALGN - Free Report) , Ecolab (ECL - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Align Technology, currently carrying a Zacks Rank #2 (Buy), reported first-quarter adjusted EPS of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million outpaced the consensus mark by 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Align Technology has a long-term estimated growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 5.9%.
Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 13.3%. ECL’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 1.7%.
Ecolab’s shares have rallied 33.8% against the industry’s 9.3% decline in the past year.
Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the consensus estimate by 4.9%. It currently carries a Zacks Rank of 2.
Boston Scientific has a long-term estimated growth rate of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.5%.
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Fresenius Medical (FMS) Q1 Earnings Beat, Operating Margin Up
Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) reported first-quarter 2024 adjusted earnings per share (EPS) of 36 cents, which beat the Zacks Consensus Estimate of 26 cents by 38.5%. The bottom line improved 28.6% year over year.
Revenue Details
Revenues of $5.13 billion (EUR 4,725 million) missed the Zacks Consensus Estimate by 0.3%. However, the company’s reported revenues were up 0.4 year over year and 2.5% at constant currency (cc).
Segmental Details
Fresenius Medical implemented a new operating model during the first quarter and started reporting under two new segments, Care Delivery and Care Enablement. Previously, the company reported under the Health Care Products and Health Care Services segments. The Care Delivery segment primarily consists of products earlier reported under Health Care Services.
Care Delivery
The segment’s revenues were flat on a year-over-year basis but gained 8% at cc and 2% on an organic basis.
Revenues in the U.S. markets gained 3% reportedly, 5% at cc and 6% on an organic basis. Sales were driven by value-based care business growth, reimbursement rate increases and a favorable payor mix, partially hurt by missed treatments due to adverse first-quarter weather events, an unusually mild 2023 flu season and capacity constraints in clinics.
FMS stated that the annualization effect of COVID-related excess mortality in the late-stage chronic kidney disease and end-stage renal disease population continues to hurt treatment growth in the U.S. market, albeit at a slower pace.
International sales declined 9% reportedly and 4% at cc but gained 4% on an organic basis. A negative exchange rate effect was partially offset by organic growth.
Care Enablement
The segment’s revenues decreased 1% year over year, but rose 1% at cc and 2% on an organic basis. A negative exchange rate effect and negative volume growth were partially offset by the positive impacts of improved pricing.
Fresenius Medical Care AG & Co. KGaA Price, Consensus and EPS Surprise
Fresenius Medical Care AG & Co. KGaA price-consensus-eps-surprise-chart | Fresenius Medical Care AG & Co. KGaA Quote
Margins
Operating income, excluding special items and U.S. Provider Relief Funding, was up 23% from the prior-year quarter. The figure also rose 23% at cc. Operating margin, excluding the aforementioned items, was 8.6%, up 130 bps from the year-ago quarter’s actuals.
2024 Outlook
Fresenius Medical maintained its outlook for revenues in 2024. The company expects revenues to grow at a low-to-mid single-digit percentage rate. The operating income is estimated to grow at a mid to high-teens percentage rate.
Summing Up
FMS exited the first quarter on a strong note, with its earnings reflecting strong organic growth on the back of improving treatment volumes as well as a stabilizing labor environment in the United States. Continued improvement in these two key factors will be beneficial for the company in 2024. Overall price improvements also supported growth in the Care Enablement segment. However, a weak flu season will likely continue to have a negative impact on sales .
Meanwhile, FMS’ newly implemented operating model led to operational improvements. The bottom line was hurt by inflationary cost increases in energy, material and personnel. These headwinds are likely to improve over the year, which is also reflected in the company’s operating outlook.
In 2023, FMS generated 346 million euros in savings by implementing initiatives under its FME25 transformation program. The figure beat the company’s target of 250-300 million euros. Fresenius Medical expects to save 650 million euros by 2025 end. These savings are likely to continue to improve the operating margin going forward.
The company’s continued divestment of its noncore and dilutive assets seems promising as it will help focus on its core and growing categories as well as boost its cash resources.
Despite mixed results, shares of Fresenius Medical gained 2.6% in pre-market trading. So far this year, the company’s shares have lost 3.4% against the industry’s 5.3% growth. The S&P 500 increased 9.1% in the same time frame.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Fresenius Medical currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space that have announced quarterly results are Align Technology, Inc. (ALGN - Free Report) , Ecolab (ECL - Free Report) and Boston Scientific Corporation (BSX - Free Report) .
Align Technology, currently carrying a Zacks Rank #2 (Buy), reported first-quarter adjusted EPS of $2.14, beating the Zacks Consensus Estimate by 8.1%. Revenues of $997.4 million outpaced the consensus mark by 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Align Technology has a long-term estimated growth rate of 6.9%. ALGN’s earnings surpassed estimates in three of the trailing four quarters and missed once, the average surprise being 5.9%.
Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 13.3%. ECL’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 1.7%.
Ecolab’s shares have rallied 33.8% against the industry’s 9.3% decline in the past year.
Boston Scientific reported first-quarter 2024 adjusted EPS of 56 cents, beating the Zacks Consensus Estimate by 9.8%. Revenues of $3.86 billion surpassed the consensus estimate by 4.9%. It currently carries a Zacks Rank of 2.
Boston Scientific has a long-term estimated growth rate of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.5%.