Fresenius Medical Care
) posted adjusted earnings of $285 million or 47 cents per
American Depositary Share or ADS (excluding the impact of
sequestration) for the third quarter of the year, topping the
Zacks Consensus Estimate by 2 cents per ADS and reflecting a 5.6%
rise in net earnings and 6.8% in earnings per share from $270
million or 44 cents per ADS, respectively in the third quarter of
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FRESENIUS MED (FMS): Free Stock Analysis
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Despite the earnings rise, shares of FMS sank 2.8% till date,
triggered by pessimism due to European Union Commission's weak
outlook for the eurozone economy. The Commission revealed that
the economy is expected to dip 0.4% this year and rebound to grow
by 1.1% next year compared with the earlier growth projection of
1.2% for 2014.
Revenues and Operating Income
Net revenue grew 7% (up 8% in terms of constant currency) year
over year to $3,666 million in the reported quarter, marginally
exceeding the Zacks Consensus Estimate of $3,643 million. Organic
sales grew 5% globally.
On a geographic basis, revenues from North American markets rose
8% to $2,436 million with organic revenue growth of 6% in the
quarter. Overseas revenues increased 5% (up 6% in constant
currency) to $1,222 million with organic growth of 4%.
Dialysis services revenues rose 8% (up 9% in terms of constant
currency) year over year to $2,813 million with North American
revenues moving up 9% to $2,224 million (with same store sales
growth of 3.5%) and international sales ascending 5% (up 8% in
terms of constant currency) to $589 million.
Dialysis product revenues went up 5% (up 4% in constant currency)
year over year to $853 million. Dialysis product revenues in
North America rose 5% to $212 million. International dialysis
product revenues scaled up 5% (up 4% in terms of constant
currency) to $633 million.
Operating income slid 2% to $557 million (15.2% of sales) but
adjusted operating income inched up 2% to $576 million (15.7%) in
the quarter. In North America, operating income inched down 1% to
$416 million (17.1%) but operating income in the international
market rose 5% to $204 million (16.7%).
As of Sep 30, 2013, Fresenius operated a network of 3,225
dialysis clinics (up 3% year over year) across North America and
overseas markets. The number of clinics in North America and
overseas both increased 3% year over year to 2,116 and 1,109,
As of Sep 30, 2013, Fresenius provided dialysis treatment to
265,824 patients (up 4% year over year) on a global scale.
Patients in North America increased 3% to 168,893 whereas number
of patients overseas rose 4% to 96,931.
In the first nine months of 2013, FMS provided 30.0 million
dialysis treatments globally, up 5% year over year. Fresenius'
North American business provided 19.0 million treatments, up 5%
year over year while the international business provided 11.0
million treatments, up 4% year over year.
Fresenius Medical Care completed its share repurchase program
(initiated on May 20, 2013) on Aug 14, 2013. The company has
repurchased 7.5 million shares for an aggregate value of €385
million ($500 million) till that date.
Fresenius concluded the second quarter with total assets of
$22,535 million compared with $22,326 million as of Dec 31, 2012.
Total debt was $8,429 million, compared with $8,298 million as of
Dec 31, 2012.
In the first nine months of the year, FMS had cash flow of $1,446
million from operating activities, down slightly by 1.4% from
$1,467 million in the same period of 2012. Capital expenditures
rose 12.8% to $494 million from $438 million in the first nine
months of 2012. Consequently, free cash flow went down 7.5% to
$952 million from $1,029 million a year ago.
Fresenius reaffirmed its revenue forecast for 2013. The company
envisions sales of over $14,600 million for 2013, up 6% year over
year. It expects net income of $1,100-$1,500 million for the
year. The company expects capital expenditure of roughly $700
million and plans to spend around $500 million (earlier $300
million) on acquisitions. The guidance assumes the impact from
We are encouraged by Fresenius' earnings and revenue beats for
the third quarter but remain concerned about the bleak economic
outlook of the eurozone economy. Further, macroeconomic issues
such as a budget cut in the U.S. (sequestration) is likely to add
more pressure on the company's margins.
Currently, FMS carries a Zacks Rank #3 (Hold). Other stocks that
are currently performing well in the medical instruments industry
Natus Medical Inc.
). All of these carry a Zacks Rank #1 (Strong Buy).