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Fresenius Medical (FMS) Q4 Earnings Beat, Operating Margin Up
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Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of 47 cents, which beat the Zacks Consensus Estimate of 36 cents by 30.6%. The bottom line improved 6.8% year over year.
Revenue Details
Revenues of $5.37 billion (EUR 4,988 million) beat the Zacks Consensus Estimate by 0.9%. The company’s reported revenues were flat year over year but recorded a growth of 7% at constant currency (cc) and 3% on an organic basis.
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 2% reportedly, 7% at cc and 1% on an organic basis. Sales were driven by value-based care business growth, reimbursement rate increases and a rise in dialysis days, partially hurt by the negative exchange rate effect.
FMS stated that the annualization effect of COVID-19-related excess mortality in the late-stage chronic kidney disease (CKD) and end-stage renal disease (ESRD) population continues to hurt treatment growth in the U.S. market.
International sales declined 11% reportedly but gained 10% at cc and 7% 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 5% at cc and 6% on an organic basis. Sales declined due to the unfavorable impact of currency movement, partially offset by higher sales of in-center disposables, machines for chronic treatment, and home hemodialysis products, as well as higher average sales prices.
Fresenius Medical Care AG & Co. KGaA Price, Consensus and EPS Surprise
Operating income, excluding special items and U.S. Provider Relief Funding, was up 14% from that reported in the prior-year quarter. The figure also rose 18% at cc. Operating margin, excluding the aforementioned items, was 11.1%, up 130 bps from the year-ago quarter’s actuals.
2024 Outlook
Fresenius Medical issued 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 fourth quarter on a strong note, with its results reflecting strong organic growth on the back of improving treatment volumes as well as a stabilizing labor environment in the United States. A potential continuation of 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.
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 are likely to continue to improve the operating margin going forward.
The company’s continued divestment of its noncore and dilutive assets looks promising as it will help focus on its core and growing categories as well as boost its cash resources.
Despite better-than-expected results, shares of Fresenius Medical were down 5% in pre-market trading. Over the past six months, the company’s shares have declined 14.3% against the industry’s gain of 9.6%. The S&P 500 increased 13.2% in the same time frame.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Currently, Fresenius Medical carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Edward Lifesciences (EW - Free Report) , Asensus Surgical (ASXC - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
Edward Lifesciences, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 7.2%. EW’s earnings surpassed estimates in two of the trailing four quarters and met the same twice, delivering an average surprise of 0.80%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edward Lifesciences' shares have risen 12.8% in the past six months compared with the industry’s 9.6% growth.
Asensus Surgical, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 40.6% for 2024. ASXC’s earnings surpassed estimates in one of the trailing four quarters, missed in two and met in the other, delivering an average negative surprise of 6.70%.
Asensus Surgical’s shares have risen 8.4% in the past six months compared with the industry’s 9.6% growth.
Integer Holdings, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have risen 17.7% in the past six months compared with the industry’s 9.6% growth.
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Fresenius Medical (FMS) Q4 Earnings Beat, Operating Margin Up
Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of 47 cents, which beat the Zacks Consensus Estimate of 36 cents by 30.6%. The bottom line improved 6.8% year over year.
Revenue Details
Revenues of $5.37 billion (EUR 4,988 million) beat the Zacks Consensus Estimate by 0.9%. The company’s reported revenues were flat year over year but recorded a growth of 7% at constant currency (cc) and 3% on an organic basis.
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 2% reportedly, 7% at cc and 1% on an organic basis. Sales were driven by value-based care business growth, reimbursement rate increases and a rise in dialysis days, partially hurt by the negative exchange rate effect.
FMS stated that the annualization effect of COVID-19-related excess mortality in the late-stage chronic kidney disease (CKD) and end-stage renal disease (ESRD) population continues to hurt treatment growth in the U.S. market.
International sales declined 11% reportedly but gained 10% at cc and 7% 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 5% at cc and 6% on an organic basis. Sales declined due to the unfavorable impact of currency movement, partially offset by higher sales of in-center disposables, machines for chronic treatment, and home hemodialysis products, as well as higher average sales prices.
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 14% from that reported in the prior-year quarter. The figure also rose 18% at cc. Operating margin, excluding the aforementioned items, was 11.1%, up 130 bps from the year-ago quarter’s actuals.
2024 Outlook
Fresenius Medical issued 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 fourth quarter on a strong note, with its results reflecting strong organic growth on the back of improving treatment volumes as well as a stabilizing labor environment in the United States. A potential continuation of 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.
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 are likely to continue to improve the operating margin going forward.
The company’s continued divestment of its noncore and dilutive assets looks promising as it will help focus on its core and growing categories as well as boost its cash resources.
Despite better-than-expected results, shares of Fresenius Medical were down 5% in pre-market trading. Over the past six months, the company’s shares have declined 14.3% against the industry’s gain of 9.6%. The S&P 500 increased 13.2% in the same time frame.
Image Source: Zacks Investment Research
Zacks Rank and Stocks to Consider
Currently, Fresenius Medical carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Edward Lifesciences (EW - Free Report) , Asensus Surgical (ASXC - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .
Edward Lifesciences, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 7.2%. EW’s earnings surpassed estimates in two of the trailing four quarters and met the same twice, delivering an average surprise of 0.80%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edward Lifesciences' shares have risen 12.8% in the past six months compared with the industry’s 9.6% growth.
Asensus Surgical, carrying a Zacks Rank of 2 at present, has an estimated growth rate of 40.6% for 2024. ASXC’s earnings surpassed estimates in one of the trailing four quarters, missed in two and met in the other, delivering an average negative surprise of 6.70%.
Asensus Surgical’s shares have risen 8.4% in the past six months compared with the industry’s 9.6% growth.
Integer Holdings, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 15%. ITGR’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 11.9%.
Integer Holdings’ shares have risen 17.7% in the past six months compared with the industry’s 9.6% growth.