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Reasons to Retain Fresenius Medical Stock in Your Portfolio Now
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Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) is well-poised for growth on the back of a broad range of dialysis products and services, and a solid global foothold. However, stiff competition remains a concern.
Shares of this Zacks Rank #3 (Hold) company have lost 5.6% year to date against the industry’s growth of 9.4%. The S&P 500 Index has increased 18.2% in the same time frame.
The company, with a market capitalization of $11.41 billion, is one of the largest integrated providers of products and services for individuals undergoing dialysis following chronic kidney failure. Its bottom line is anticipated to improve 12.4% over the next five years. FMS’ earnings beat estimates in two of the trailing four quarters, missed the same in one and met in another, delivering an average surprise of 13.2%.
Image Source: Zacks Investment Research
Key Catalysts for FMS
Fresenius Medical is a leading provider of dialysis and related services for individuals with renal diseases. It also provides other healthcare services, including value and risk-based care programs, pharmacy services, vascular specialty services and ambulatory treatment services.
Furthermore, the company manufactures and commercializes an extensive array of healthcare products, including hemodyalisis, peritoneal dialysis, acute dialysis, acute cardiopulmonary and apheresis products, and water treatment systems. FMS also manages its own dialysis clinics.
Per a Fortune Business Insights’ report, the total market size of the global dialysis market was $95.22 billion in 2023 and is expected to reach $181.16 billion in 2032, at a CAGR of 7.9%. This represents a significant growth opportunity for FMS.
The company reports under two operating segments — Care Delivery (provides dialysis and value-based services) and Care Enablement (distributes health care products).
The Care Enablement segment is likely to be a key top-line driver in the upcoming quarters on the back of positive pricing momentum. The organic 3% growth in the top line was majorly driven by improved pricing for healthcare products. The company’s long-tern cost savings initiative, FME25, is also helping the segment to offset inflationary cost increases and negative foreign currency exchange effects.
The FME25 program contributed 57 million euros in savings during the second quarter and is expected to save 100-150 million euros for full-year 2024. These estimated savings are likely to support margin expansion for the Care Enablement segment going forward.
Meanwhile, the company’s initiatives in China, a key growing market for the company, are likely to support its growth momentum in the country. The restructuring of the sales channel and the mix of products done by FMS in the past few quarters has helped minimize the impact of the Chinese volume-based procurement program. The company has also localized production in China to gain entry in profitable market segments.
The Care Delivery segment also represents a significant growth opportunity over the long term. The company’s ongoing portfolio optimization plan buoys optimism. It is divesting its less-profitable, noncore and dilutive assets to focus on the expansion of its core and high-performing businesses. The segment continues to benefit from the rising demand for its value-based care business, reimbursement rate increases and a favorable per-payer mix.
What’s Hurting FMS?
Although Fresenius Medical’s Care Delivery segment offers long-term growth opportunities, the segment is facing several macro challenges, which are impeding its sales growth. Meanwhile, the divestments, as part of its portfolio optimization plan, are resulting in loss of sales, further hurting growth, especially in international markets.
The same market treatment growth in the United States remained flat year over year during the second quarter. On its second-quarter earnings call, FMS stated that there is an elevated mortality rate amid extended influenza season and rising COVID cases. A continued mortality rate might hurt treatment volumes in the upcoming quarters.
The segment’s margins are also under pressure as it continues to face rising labor expenses as well as higher costs of medical supplies. FMS estimates that higher wages and increased staffing requirements may lead to a three-percentage point increase in labor expenses for full-year 2024 compared to the previous year.
Estimate Trend for FMS
The Zacks Consensus Estimate for 2024 revenues is pegged at $21.1 billion, indicating growth of 0.3% from the previous year’s reported number. The consensus mark for earnings is pinned at $1.51 per share, implying growth of 8.6% from the year-ago level.
DaVita has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%.
DaVita’s shares have risen 43.4% year to date compared with the industry’s 14.3% growth.
Aspen Technology has an estimated long-term growth rate of 13.1%. AZPN’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average surprise being 4.24%.
Shares of Aspen Technology have lost 4.2% year to date against the industry’s 13.5% growth.
Universal Health Services has an estimated long-term growth rate of 19%. UHS' earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
The company’s shares have risen 48.6% year to date compared with the industry’s 39.7% growth.
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Reasons to Retain Fresenius Medical Stock in Your Portfolio Now
Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) is well-poised for growth on the back of a broad range of dialysis products and services, and a solid global foothold. However, stiff competition remains a concern.
Shares of this Zacks Rank #3 (Hold) company have lost 5.6% year to date against the industry’s growth of 9.4%. The S&P 500 Index has increased 18.2% in the same time frame.
The company, with a market capitalization of $11.41 billion, is one of the largest integrated providers of products and services for individuals undergoing dialysis following chronic kidney failure. Its bottom line is anticipated to improve 12.4% over the next five years. FMS’ earnings beat estimates in two of the trailing four quarters, missed the same in one and met in another, delivering an average surprise of 13.2%.
Image Source: Zacks Investment Research
Key Catalysts for FMS
Fresenius Medical is a leading provider of dialysis and related services for individuals with renal diseases. It also provides other healthcare services, including value and risk-based care programs, pharmacy services, vascular specialty services and ambulatory treatment services.
Furthermore, the company manufactures and commercializes an extensive array of healthcare products, including hemodyalisis, peritoneal dialysis, acute dialysis, acute cardiopulmonary and apheresis products, and water treatment systems. FMS also manages its own dialysis clinics.
Per a Fortune Business Insights’ report, the total market size of the global dialysis market was $95.22 billion in 2023 and is expected to reach $181.16 billion in 2032, at a CAGR of 7.9%. This represents a significant growth opportunity for FMS.
The company reports under two operating segments — Care Delivery (provides dialysis and value-based services) and Care Enablement (distributes health care products).
The Care Enablement segment is likely to be a key top-line driver in the upcoming quarters on the back of positive pricing momentum. The organic 3% growth in the top line was majorly driven by improved pricing for healthcare products. The company’s long-tern cost savings initiative, FME25, is also helping the segment to offset inflationary cost increases and negative foreign currency exchange effects.
The FME25 program contributed 57 million euros in savings during the second quarter and is expected to save 100-150 million euros for full-year 2024. These estimated savings are likely to support margin expansion for the Care Enablement segment going forward.
Fresenius Medical Care AG & Co. KGaA Price
Fresenius Medical Care AG & Co. KGaA price | Fresenius Medical Care AG & Co. KGaA Quote
Meanwhile, the company’s initiatives in China, a key growing market for the company, are likely to support its growth momentum in the country. The restructuring of the sales channel and the mix of products done by FMS in the past few quarters has helped minimize the impact of the Chinese volume-based procurement program. The company has also localized production in China to gain entry in profitable market segments.
The Care Delivery segment also represents a significant growth opportunity over the long term. The company’s ongoing portfolio optimization plan buoys optimism. It is divesting its less-profitable, noncore and dilutive assets to focus on the expansion of its core and high-performing businesses. The segment continues to benefit from the rising demand for its value-based care business, reimbursement rate increases and a favorable per-payer mix.
What’s Hurting FMS?
Although Fresenius Medical’s Care Delivery segment offers long-term growth opportunities, the segment is facing several macro challenges, which are impeding its sales growth. Meanwhile, the divestments, as part of its portfolio optimization plan, are resulting in loss of sales, further hurting growth, especially in international markets.
The same market treatment growth in the United States remained flat year over year during the second quarter. On its second-quarter earnings call, FMS stated that there is an elevated mortality rate amid extended influenza season and rising COVID cases. A continued mortality rate might hurt treatment volumes in the upcoming quarters.
The segment’s margins are also under pressure as it continues to face rising labor expenses as well as higher costs of medical supplies. FMS estimates that higher wages and increased staffing requirements may lead to a three-percentage point increase in labor expenses for full-year 2024 compared to the previous year.
Estimate Trend for FMS
The Zacks Consensus Estimate for 2024 revenues is pegged at $21.1 billion, indicating growth of 0.3% from the previous year’s reported number. The consensus mark for earnings is pinned at $1.51 per share, implying growth of 8.6% from the year-ago level.
Stocks to Consider
Some better-ranked stocks in the broader medical space that have announced quarterly results are DaVita (DVA - Free Report) , Aspen Technology (AZPN - Free Report) and Universal Health Services (UHS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 24.2%.
DaVita’s shares have risen 43.4% year to date compared with the industry’s 14.3% growth.
Aspen Technology has an estimated long-term growth rate of 13.1%. AZPN’s earnings surpassed estimates in two of the trailing four quarters and missed the same twice, the average surprise being 4.24%.
Shares of Aspen Technology have lost 4.2% year to date against the industry’s 13.5% growth.
Universal Health Services has an estimated long-term growth rate of 19%. UHS' earnings surpassed estimates in each of the trailing four quarters, the average surprise being 14.58%.
The company’s shares have risen 48.6% year to date compared with the industry’s 39.7% growth.