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Fresenius Medical (FMS) Q2 Earnings In Line, Operating Margin Up
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Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of 38 cents, which met the Zacks Consensus Estimate. The bottom line improved 17.5% year over year.
Revenue Details
Revenues of $5.15 billion (EUR 4,766 million) missed the Zacks Consensus Estimate by 2.5%. The company’s reported revenues were down 1.2% year over year and 1.7% at constant currency (cc). However, revenues were up 2% organically. The top line was hurt by divestures made in 2023 as well as in the second quarter of 2024 in international markets.
During the reported quarter, the company closed the divestment of Cura Day Hospitals Group, Australia, and its dialysis clinic networks in Chile, Ecuador, Sub-Saharan Africa and Turkiye.
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 down 2.6% on a year-over-year basis and 3.3% at cc but gained 2% on an organic basis.
Revenues in the U.S. markets gained 1% reportedly and 1% on an organic basis. The top line was flat year over year at cc. Sales were driven by value-based care business growth, higher reimbursement rates and a favorable payor mix. U.S. same-market treatment growth was hurt by elevated mortality compared to the year-ago period.
International sales declined 18% reportedly as well as at cc but gained 3% on an organic basis. The decline was driven by divestments closed during the second quarter, partially offset by organic growth.
Care Enablement
The segment’s revenues increased 3% year over year reportedly as well as at cc and 3% on an organic basis. The growth was driven by the positive impacts of improved pricing.
Fresenius Medical Care AG & Co. KGaA Price, Consensus and EPS Surprise
Operating income rose 19% from the prior-year quarter’s level. The figure was up 21% at cc. Operating margin was 8.9%, up 150 bps from the year-ago quarter’s reported actuals.
2024 Outlook
Fresenius Medical maintained its outlook for 2024 revenues. 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 second quarter on a mixed 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 should be beneficial for the company in 2024. Overall price improvements also supported growth in the Care Enablement segment. However, the effects of elevated mortality 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 the second quarter, FMS generated 57 million euros in savings by implementing initiatives under its FME25 transformation program. The company expects to reach the upper end of the targeted additional sustainable savings range of EUR 100-150 million by 2024-end. Fresenius Medical expects to save 650 million euros by the end of 2025. However, the portfolio optimization plan is estimated to negatively impact operating income by around EUR 250 million for full-year 2024.
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 were down 5.7% in pre-market trading. The company’s shares have lost 7.2% year to date against the industry’s 3.7% growth. The S&P 500 increased 14.8% in the said 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 Boston Scientific Corporation (BSX - Free Report) , Hologic (HOLX - Free Report) and Universal Health Services (UHS - Free Report) .
Boston Scientific reported second-quarter 2024 adjusted EPS of 62 cents, which beat the Zacks Consensus Estimate by 6.9%. Revenues of $4.12 billion surpassed the Zacks Consensus Estimate by 2.5%. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boston Scientific has a long-term growth rate of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
Hologic, carrying a Zacks Rank of 2 at present, has a long-term growth rate of 7.4%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 4.50%.
Hologic reported second-quarter 2024 adjusted EPS of $1.06, which beat the Zacks Consensus Estimate by 3.9%. Revenues of $1 billion surpassed the Zacks Consensus Estimate by 1.1%.
Universal Health Services reported second-quarter 2024 adjusted EPS of $4.31, which beat the Zacks Consensus Estimate by 27.9%. Revenues of $3.9 billion surpassed the Zacks Consensus Estimate by 1.5%.
Universal Health Services has a long-term growth rate of 18%. UHS’ earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
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Fresenius Medical (FMS) Q2 Earnings In Line, Operating Margin Up
Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) reported second-quarter 2024 adjusted earnings per share (EPS) of 38 cents, which met the Zacks Consensus Estimate. The bottom line improved 17.5% year over year.
Revenue Details
Revenues of $5.15 billion (EUR 4,766 million) missed the Zacks Consensus Estimate by 2.5%. The company’s reported revenues were down 1.2% year over year and 1.7% at constant currency (cc). However, revenues were up 2% organically. The top line was hurt by divestures made in 2023 as well as in the second quarter of 2024 in international markets.
During the reported quarter, the company closed the divestment of Cura Day Hospitals Group, Australia, and its dialysis clinic networks in Chile, Ecuador, Sub-Saharan Africa and Turkiye.
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 down 2.6% on a year-over-year basis and 3.3% at cc but gained 2% on an organic basis.
Revenues in the U.S. markets gained 1% reportedly and 1% on an organic basis. The top line was flat year over year at cc. Sales were driven by value-based care business growth, higher reimbursement rates and a favorable payor mix. U.S. same-market treatment growth was hurt by elevated mortality compared to the year-ago period.
International sales declined 18% reportedly as well as at cc but gained 3% on an organic basis. The decline was driven by divestments closed during the second quarter, partially offset by organic growth.
Care Enablement
The segment’s revenues increased 3% year over year reportedly as well as at cc and 3% on an organic basis. The growth was driven 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 rose 19% from the prior-year quarter’s level. The figure was up 21% at cc. Operating margin was 8.9%, up 150 bps from the year-ago quarter’s reported actuals.
2024 Outlook
Fresenius Medical maintained its outlook for 2024 revenues. 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 second quarter on a mixed 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 should be beneficial for the company in 2024. Overall price improvements also supported growth in the Care Enablement segment. However, the effects of elevated mortality 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 the second quarter, FMS generated 57 million euros in savings by implementing initiatives under its FME25 transformation program. The company expects to reach the upper end of the targeted additional sustainable savings range of EUR 100-150 million by 2024-end. Fresenius Medical expects to save 650 million euros by the end of 2025. However, the portfolio optimization plan is estimated to negatively impact operating income by around EUR 250 million for full-year 2024.
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 were down 5.7% in pre-market trading. The company’s shares have lost 7.2% year to date against the industry’s 3.7% growth. The S&P 500 increased 14.8% in the said 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 Boston Scientific Corporation (BSX - Free Report) , Hologic (HOLX - Free Report) and Universal Health Services (UHS - Free Report) .
Boston Scientific reported second-quarter 2024 adjusted EPS of 62 cents, which beat the Zacks Consensus Estimate by 6.9%. Revenues of $4.12 billion surpassed the Zacks Consensus Estimate by 2.5%. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Boston Scientific has a long-term growth rate of 12.5%. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.18%.
Hologic, carrying a Zacks Rank of 2 at present, has a long-term growth rate of 7.4%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 4.50%.
Hologic reported second-quarter 2024 adjusted EPS of $1.06, which beat the Zacks Consensus Estimate by 3.9%. Revenues of $1 billion surpassed the Zacks Consensus Estimate by 1.1%.
Universal Health Services reported second-quarter 2024 adjusted EPS of $4.31, which beat the Zacks Consensus Estimate by 27.9%. Revenues of $3.9 billion surpassed the Zacks Consensus Estimate by 1.5%.
Universal Health Services has a long-term growth rate of 18%. UHS’ earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.