Fresenius Medical Q3 Earnings Beat Estimates, Operating Margin Rises

Fresenius Medical Care AG & Co. FMS reported third-quarter 2024 adjusted earnings per share (EPS) of 45 cents, which surpassed the Zacks Consensus Estimate by 7.1%. The bottom line improved 45.2% year over year.During the reported quarter, the company’s closed divestments included clinic operations in Curacao, Guatemala and Peru.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.Revenue DetailRevenues of $5.23 billion (EUR 4,760 million) missed the Zacks Consensus Estimate by 2.4%. The company’s reported revenues were down 3.6% year over year and 2.4% at constant currency (cc). However, revenues were up 1.9% organically.Per management, the top line was hurt by divestitures realized through the third quarter as it negatively impacted growth by 230 basis points.Segmental DetailsFresenius Medical implemented a new operating model during the first quarter and started reporting under two new segments, Care Delivery and Care Enablement.Care DeliveryThe segment’s revenues were down 5.1% on a year-over-year basis and 4.2% at cc but gained 1% on an organic basis.Revenues in the U.S. markets declined 1.3% and gained 0.4% on an organic basis. The top line was flat year over year at cc. The decline was due to the impact of divestitures closed this year. However, organic sales were driven by value-based care business growth, higher reimbursement rates and a favorable payer mix.Per management, during the third-quarter 2024, the U.S. same-market treatment growth improved sequentially. During the quarter under discussion, adjusted for the exit from less profitable acute care contracts (-0.2%), underlying the U.S. same market treatment growth returned to positive growth (+0.2%). However, effects from elevated mortality continued to weigh on the development.International sales declined 21.6% reportedly and 20.9% at cc but gained 4.4% on an organic basis. The decline was due to divestments realized as part of the portfolio optimization plan and was partially offset by organic growth. The organic growth was supported by accelerated same-market treatment growth of 2.9% and higher reimbursement rates.Care EnablementThe segment’s revenues increased 2.2% year over year reportedly and 4.2% at cc as well as organically. The growth was driven by solid volume development across all geographical regions. Also, the continued pricing momentum, excluding China, added to this growth.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 QuoteMargin AnalysisOperating income rose 42.7% from the prior-year quarter’s level. The metric was up 42.8% at cc. Operating margin was 9.7%, up 310 bps from the year-ago quarter’s reported actuals.2024 GuidanceFresenius Medical maintained its outlook for 2024 revenues while revising its outlook for operating income. The company continues to expect revenues to grow at a low-to-mid single-digit percentage rate. The operating income is now estimated to grow at 16-18% as compared to the previous outlook of mid- to high-teen percentage rate growth.Our TakeFMS exited the third quarter on a mixed note, with its earnings reflecting strong organic growth on the back of improving treatment volumes as well as a stabilizing labor environment in the United States. Continued improvement in these two key factors should be beneficial for the company in the rest of 2024. Overall pricing momentum also supported growth in the Care Enablement segment. However, the effects of elevated mortality will likely continue to hurt sales.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. FMS expects to realize further improvements in its operational performance and transformation efforts in the fourth quarter of fiscal 2024.In the third quarter, FMS generated 64 million euros in savings by implementing initiatives under its FME25 transformation program. FMS delivered EUR 173 in million additional sustainable savings year-to-date, thus getting well ahead of the targeted EUR 100 to 150 million by year-end 2024. Fresenius Medical expects to save 650 million euros by the end of 2025. However, the portfolio optimization plan is estimated to negatively impact operating income by around EUR 250 million for the full-year 2024.The company’s continued divestment of its noncore and dilutive assets seem promising, as it will help focus on its core and growing categories as well as boost its cash resources.FMS’ Zacks Rank & Other Stocks to ConsiderFMS carries a Zacks Rank #2 (Buy) at present.Some other top-ranked stocks in the broader medical space are AngioDynamics ANGO, Quest Diagnostics DGX and RadNet RDNT. All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.ANGO’s earnings surpassed estimates in three of the trailing four quarters and missed once, delivering an average surprise of 31.71%.AngioDynamics’ shares have lost 19.2% year to date against the industry’s 6.1% growth.Quest Diagnostics has an estimated long-term growth rate of 6.8%. DGX's earnings surpassed estimates in each of the trailing four quarters, with the average being 3.3%.Quest Diagnostics has gained 42% compared with the industry's 14.9% growth year to date.RadNet’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 98.2%.RDNT's shares have surged 93.7% year to date compared with the industry’s 14.8% growth.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report AngioDynamics, Inc. (ANGO): Free Stock Analysis Report Quest Diagnostics Incorporated (DGX): Free Stock Analysis Report Fresenius Medical Care AG & Co. KGaA (FMS): Free Stock Analysis Report RadNet, Inc. (RDNT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks