Fresenius' 1Q Mixed, Profit Up

Fresenius Medical Care ( FMS - Snapshot Report ) , the world's largest dialysis company, posted first-quarter 2012 earnings per share of 80 cents, beating the Zacks Consensus Estimate of 76 cents and the year-ago earnings of 73 cents per share. Adjusted income excludes gain from investments.

Net income (attributable to the company) shot up 68% year over year to $370 million on the back of one-time income.

Revenue Analysis

Net revenues rose 9% (up 10% at constant currency) year over year to $3,249 million, but missed the Zacks Consensus Estimate of $3,266 million. Organic revenue growth was 3% on a global basis.

Geographically, revenues from the North American markets moved up 9% to $2,105 million in the first quarter while overseas revenues increased 8% (up 12% at constant currency) to $1,136 million.

Dialysis services revenues increased 11% year over year to $2,478 million with domestic and international sales rising 11% each, to $1,918 million and $560 million, respectively. Average revenue per treatment for domestic clinics increased to $353 from $348 a year ago.

Consolidated dialysis product revenues were up 3% year over year to $771 million. Dialysis product sales in domestic markets dropped 4% to $187 million mainly on account of reduced prices for pharmaceuticals. International dialysis product sales rose 4% to $576 million, boosted by higher sales of dialysis machines.

Operating Statistics

Fresenius operated a network of 3,119 dialysis clinics (up 13% year over year) across North America and the overseas markets, as of March 31, 2012. It has provided dialysis treatment to 253,041 patients (up 17% year over year) worldwide as of March 31, 2012. During the first quarter, the company provided roughly 9.21 million dialysis treatments globally, up 13% year over year.

Margins

Operating margin rose to 15.5% from 14.9% a year ago. In North America, operating margin climbed to 16.5% from 16.2%. Operating margin for overseas markets increased to 17.2% from 16.2% helped by favorable currency exchange movements.

Cash Flows

Fresenius generated operating cash flows of $481 million (roughly 14.8% of sales) in the first quarter, a 174% year-over-year surge. The company spent $122 million on capital expenditure in the quarter. Free cash flow, prior to acquisitions, was $359 million versus $62 million a year ago. The company expended $1,526 million for investments and acquisitions. Free cash flow, post acquisitions, divestures and investments, was $(1167) million compared with $(277) million in the prior-year period.

Guidance

Fresenius reiterated its forecast for 2012. The company continues to envision sales of roughly $14 billion for 2012. Net income for the year is expected at $1.3 billion and net income (attributable to shareholders) is pegged at $1.14 billion. Net income excludes gain on investments of about $127 million in the first quarter. The company expects capital expenditure of roughly $700 million and plans to spend around $1.8 billion on acquisitions.

Fresenius is the largest provider of products and services for patients undergoing dialysis treatment on the planet. The company’s principal competitor in the U.S. is DaVita Inc. ( DVA - Analyst Report ) , which provides dialysis services for patients suffering from chronic kidney failure or end stage renal disease.