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Fresenius Medical (FMS) Beats on Q3 Earnings, Lags Revenues

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Fresenius Medical Care AG & Co. KGaA (FMS - Free Report) posted adjusted earnings of 69 cents per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of 58 cents. Earnings improved 16.9% year over year.

In the quarter under review, revenues fell 7.4% to $4.72 billion, which lagged the Zacks Consensus Estimate of $5.02 billion.

The stock carries a Zacks Rank #4 (Sell).

Segmental Details

In the third quarter, Fresenius Medical reported through two segments — Health Care Services and Health Care Products.

Health Care Services revenues declined 7.8% at constant currency (cc) on a year-over-year basis and 7.8% organically.

Health Care Products revenues inched up 1.4% at cc and dipped 0.4% organically. Per management, the upside was driven by higher sales of hemodialysis products and renal pharmaceuticals.

Dialysis treatments increased 3%.

Geographical Growth

North America

Per management, this region contributed 70% to revenues in the reported quarter. Revenues in the region fell 11% at cc and 9% organically.

EMEA

Revenues in this zone inched up 1% at cc in the quarter. Revenues fell 2% on a year-over-year basis.  

Asia-Pacific

Revenues in this zone increased 4% at cc in the quarter. Revenues increased 3% on a year-over-year basis.   

Latin America

Revenues in Latin America increased 27% at cc in the quarter. Revenues increased 3% on a year-over-year basis.   

Margin

Gross profit declined 11% in the quarter and 11.1% at cc.

As a percentage of revenues, gross margin was 31.2%, down 170 basis points (bps) in the third quarter.

Selling, general and administrative costs declined 7.4% on a year-over-year basis in the third quarter. Research and development costs declined 7%.

Guidance

For 2018, Fresenius Medical expects revenue growth in the range of 2-3% at cc, lower than the previous range of 5-7% at cc. Notably, the Zacks Consensus Estimate for revenues is pegged at $20.2 billion.

Adjusted net income is expected to grow 2-3% at cc, lower than the previous guidance of 7-9%.

Summing Up

Fresenius Medical posted mixed results in the third quarter, wherein adjusted earnings beat the estimates while revenues missed the same.

Lackluster performance by Health Care Services segment is a concern. A lowered guidance indicates concerns for the stock. The company witnessed lower growth in the commercial dialysis services revenues. Fresenius Medical reported year-over-year declines in North America revenues.

Care Coordination margin improved significantly on synergies from the Cura acquisition. In fact, management is optimistic about the recent buyouts of Sound Physicians and NxStage Medical. Furthermore, strong sales in the Asia-Pacific and Latin America regions paint a bright picture.

Q3 Earnings of MedTech Majors at a Glance

A few better-ranked stocks in the broader medical space, which reported solid earnings this season are, Stryker Corporation (SYK - Free Report) , Intuitive Surgical, Inc (ISRG - Free Report) and Merit Medical Systems, Inc (MMSI - Free Report) .

All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical reported adjusted earnings of $2.83 per share in the third quarter of 2018, which beat the Zacks Consensus Estimate of $2.65. Adjusted earnings improved 1.8% year over year.

Stryker delivered third-quarter 2018 adjusted earnings per share (EPS) of $1.69, which beat the Zacks Consensus Estimate of $1.68. Earnings improved 11.2% year over year, within the company’s guidance.

Merit Medical reported third-quarter 2018 adjusted EPS of 47 cents, beating the Zacks Consensus Estimate of 42 cents. Adjusted earnings improved 46.9% from the year-ago quarter’s tally.

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