Fresenius Medical Care (FMS - Free Report) has had a dismal run on the bourses of late. Over the last three months, the company’s shares lost 6.4%, wider than the S&P 500 index’s fall of 0.2%.
A rapidly changing healthcare environment in the United States, a sluggish first quarter, tough regulatory environment, hurdles in collecting trade receivables in foreign legal paradigms and competition in the niche markets are significant challenges for the company.
The stock has a Zacks Rank #5 (Strong Sell). Here we take a sneak peek at the major issues plaguing Fresenius Medical.
Fresenius Medical exited the first quarter of 2018 on a dull note, missing the Zacks Consensus Estimate on both the counts. Dismal performance in North America has been a major dampener. Fresenius Medical’s adjusted earnings of 49 cents per American Depositary Share (ADS) in the first quarter of 2018 missed the Zacks Consensus Estimate by 30%. Earnings per ADS declined 7.5% on a year-over-year basis.
Fresenius Medical Care Price, Consensus and EPS Surprise
The company continues to face significant foreign-exchange headwinds. Further, higher costs related to dialysis services and peritoneal dialysis product business in China is likely to put margins under pressure.
In the first quarter, Health Care Services revenues declined 3% at cc on a year-over-year basis. By geography, North America revenues declined 5% at cc on a year-over-year basis and accounted for 70% of total revenues.
For 2018, Fresenius Medical estimates revenue growth in the band of 5-7% at cc, lower than the previous guidance of 8% at cc. The Zacks Consensus Estimate for revenues is currently pegged at $21.3 billion, reflecting a rise of 6.2% year over year.
Fresenius Medical has a number of competitors in the field of health care services and dialysis products. Tough competition in niche markets is likely to mar the company’s sales opportunities and lower market share. Per management, such concerns pose minimum threat to the company in the short term and in the midterm.
The problem of competitors copying patents of Fresenius Medical is an additional concern, which might arise from inadequate protection for technologies and products developed by the company. This might affect the company’s bottom line in the long term.
Buoyed by the above factors, the estimate revision trend for Fresenius Medical has been declining. The Zacks Consensus Estimate for current-quarter earnings declined 17.8% to 60 cents in the last two months. Full-year earnings estimates dropped 9% to $2.64 over the same time frame.
Stocks to Consider
A few better-ranked stocks in the broader medical space are ABIOMED, Inc. (ABMD - Free Report) , Genomic Health, Inc. (GHDX - Free Report) and Exelixis, Inc. (EXEL - Free Report) .
ABIOMED has a long-term growth rate of 27%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1.
Exelixis has a projected earnings growth rate of 75% for the current quarter. The stock sports a Zacks Rank #1.
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