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Reasons to Retain Fresenius Medical (FMS) 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 7.7% year to date against the industry’s growth of 7%. The S&P 500 Index has increased 9.2% in the same time frame.
The company, with a market capitalization of $11.09 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 13.6% over the next five years. FMS’ earnings beat estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 25.81%.
Image Source: Zacks Investment Research
Key Catalysts
Fresenius Medical provides a wide range of dialysis products in its dialysis and third-party clinics. These include modular machine components, dialyzers, bloodline systems, HD (hemodialysis) solutions, concentrates and water treatment systems.
The company offers an extensive array of Hemodyalisis, Peritoneal dialysis and Acute Dialysis products. It is focused on further expanding its home dialysis offerings in order to further boost the quality of life for patients and increase their choice of available treatments.
Last month, FMS introduced an innovative Augmented Reality (AR) program, Ready4 multiFiltratePRO AR, which will likely revolutionize training for medical staff in Intensive Care Units. This groundbreaking development combines digital learning elements with hands-on training on the Fresenius Medical Continuous Kidney Replacement Therapy system, enhancing the skills of ICU nursing staff.
In February, the company announced the receipt of FDA 510(k) clearance for its 5008X Hemodialysis System. The new system is aimed at providing an improved standard of care in dialysis therapy to patients suffering from kidney diseases in the United States.
Fresenius Medical has a solid market hold in the regions of North America, Europe (EMEA), the Asia Pacific and Latin America. To strengthen its market position, the company is resorting to various approaches like enhancing its organic growth and making strategic and suitable acquisitions. FMS also aims to align its business activities through public-private partnerships in the dialysis business. This way, it can tap into new markets in the coming quarters.
Fresenius Medicals is also realigning its portfolio to concentrate on businesses and markets with an optimal strategic fit, substantial scale and potential for sustainable growth. The company has also successfully executed several divestments in 2023, as part of its ongoing Portfolio Optimization Program. It did so by divesting its non-core and dilutive assets. In March, it announced the sale of its dialysis clinic networks in Brazil, Colombia, Chile and Ecuador to DaVita.
FMS exited the fourth quarter on a strong note, with its results reflecting strong organic growth on the back of value-based care business growth and reimbursement rate increases in the United States. A potential continuation of improvement in these two key factors will be beneficial for the company in the rest of 2024. The company expects its 2024 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.
What’s Hurting the Stock?
Fresenius Medical has numerous competitors in the fields of healthcare services and dialysis products. Intense competition in the niche markets is likely to hamper the company’s sales opportunities, which, in turn, can lead to a loss of market share.
Last year, positive data from a late-stage study evaluating Novo Nordisk’s new diabetes drug, Ozempic, raised concerns about a potential rise in competition for Fresenius Medical. Clinical data suggests that the adoption of Ozempic may have an adverse impact on the dialysis of patients — a major source of FMS’ revenues — going forward. A lower volume of dialysis, led by a potential delay in chronic kidney disease (due to the use of Ozempic), can be detrimental for Fresenius Medical’s top line.
The company’s U.S. revenues continued to be hurt by the FX impact. Moreover, the bottom line was hurt by inflationary cost increases in energy, material and personnel. However, FMS’ cost-saving initiatives have helped cushion the decline in operating margin. Meanwhile, planned divestitures, as part of the company’s transformational plan, are likely to lead to a loss of revenues going forward.
Estimate Trend
The Zacks Consensus Estimate for 2024 revenues is pegged at $21.42 billion, indicating growth of 1.8% from the previous year’s reported number. The consensus mark for earnings is pinned at $1.53 per share, implying growth of 10.1% from the year-ago level.
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Cencora (COR - Free Report) .
DaVita, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have risen 27.9% year to date compared with the industry’s 6.3% growth.
Cardinal Health, carrying a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.6%.
CAH’s shares have risen 7.2% year to date compared with the industry’s 5.4% growth.
Cencora, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 9.8%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.7%.
Cencora’s shares have risen 16.2% year to date compared with the industry’s 3.4% growth.
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Reasons to Retain Fresenius Medical (FMS) 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 7.7% year to date against the industry’s growth of 7%. The S&P 500 Index has increased 9.2% in the same time frame.
The company, with a market capitalization of $11.09 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 13.6% over the next five years. FMS’ earnings beat estimates in three of the trailing four quarters and missed the same once, delivering an average surprise of 25.81%.
Image Source: Zacks Investment Research
Key Catalysts
Fresenius Medical provides a wide range of dialysis products in its dialysis and third-party clinics. These include modular machine components, dialyzers, bloodline systems, HD (hemodialysis) solutions, concentrates and water treatment systems.
The company offers an extensive array of Hemodyalisis, Peritoneal dialysis and Acute Dialysis products. It is focused on further expanding its home dialysis offerings in order to further boost the quality of life for patients and increase their choice of available treatments.
Last month, FMS introduced an innovative Augmented Reality (AR) program, Ready4 multiFiltratePRO AR, which will likely revolutionize training for medical staff in Intensive Care Units. This groundbreaking development combines digital learning elements with hands-on training on the Fresenius Medical Continuous Kidney Replacement Therapy system, enhancing the skills of ICU nursing staff.
In February, the company announced the receipt of FDA 510(k) clearance for its 5008X Hemodialysis System. The new system is aimed at providing an improved standard of care in dialysis therapy to patients suffering from kidney diseases in the United States.
Fresenius Medical has a solid market hold in the regions of North America, Europe (EMEA), the Asia Pacific and Latin America. To strengthen its market position, the company is resorting to various approaches like enhancing its organic growth and making strategic and suitable acquisitions. FMS also aims to align its business activities through public-private partnerships in the dialysis business. This way, it can tap into new markets in the coming quarters.
Fresenius Medicals is also realigning its portfolio to concentrate on businesses and markets with an optimal strategic fit, substantial scale and potential for sustainable growth. The company has also successfully executed several divestments in 2023, as part of its ongoing Portfolio Optimization Program. It did so by divesting its non-core and dilutive assets. In March, it announced the sale of its dialysis clinic networks in Brazil, Colombia, Chile and Ecuador to DaVita.
FMS exited the fourth quarter on a strong note, with its results reflecting strong organic growth on the back of value-based care business growth and reimbursement rate increases in the United States. A potential continuation of improvement in these two key factors will be beneficial for the company in the rest of 2024. The company expects its 2024 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.
What’s Hurting the Stock?
Fresenius Medical has numerous competitors in the fields of healthcare services and dialysis products. Intense competition in the niche markets is likely to hamper the company’s sales opportunities, which, in turn, can lead to a loss of market share.
Last year, positive data from a late-stage study evaluating Novo Nordisk’s new diabetes drug, Ozempic, raised concerns about a potential rise in competition for Fresenius Medical. Clinical data suggests that the adoption of Ozempic may have an adverse impact on the dialysis of patients — a major source of FMS’ revenues — going forward. A lower volume of dialysis, led by a potential delay in chronic kidney disease (due to the use of Ozempic), can be detrimental for Fresenius Medical’s top line.
The company’s U.S. revenues continued to be hurt by the FX impact. Moreover, the bottom line was hurt by inflationary cost increases in energy, material and personnel. However, FMS’ cost-saving initiatives have helped cushion the decline in operating margin. Meanwhile, planned divestitures, as part of the company’s transformational plan, are likely to lead to a loss of revenues going forward.
Estimate Trend
The Zacks Consensus Estimate for 2024 revenues is pegged at $21.42 billion, indicating growth of 1.8% from the previous year’s reported number. The consensus mark for earnings is pinned at $1.53 per share, implying growth of 10.1% from the year-ago level.
Fresenius Medical Care AG & Co. KGaA Price
Fresenius Medical Care AG & Co. KGaA price | Fresenius Medical Care AG & Co. KGaA Quote
Stocks to Consider
Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Cencora (COR - Free Report) .
DaVita, carrying a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 12.1%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 35.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have risen 27.9% year to date compared with the industry’s 6.3% growth.
Cardinal Health, carrying a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 15.6%.
CAH’s shares have risen 7.2% year to date compared with the industry’s 5.4% growth.
Cencora, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 9.8%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 6.7%.
Cencora’s shares have risen 16.2% year to date compared with the industry’s 3.4% growth.