Fresenius Earnings Lower Y/Y - Analyst Blog

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Dialysis company Fresenius Medical Care ( FMS ) announced first quarter 2013 earnings per ordinary share of 74 cents which was 8% lower than the year-ago adjusted earnings per share of 80 cents.

Net income attributable to the company dropped 39% year over year to $225 million (or 74 cents per share) in the quarter.

Quarter in Detail

Net revenues edged up 7% (up 7% in terms of constant currency) year over year to $3,464 million in the reported quarter. Organic sales growth was 4% on a global basis.

On a geographic basis, revenues from the North American markets rose 9% to $2,287 million in the quarter while overseas revenues increased 3% (up 4% in terms of constant currency) to $1,169 million.

Dialysis services revenues increased 8% (up 9% in terms of constant currency) year over year to $2,678 million with U.S. sales spurting 10% year over year to $2,104 million and international sales ascending 3% (up 5% in terms of constant currency) year over year to $574 million. Average revenue per treatment for U.S. clinics grew to $359 from $353 a year ago.

Consolidated dialysis product revenues increased 2% (up 2% in terms of constant currency) year over year to $786 million. Dialysis product sales in the U.S. market decreased 2% to $183 million. International dialysis product sales increased 3% (up 3% in terms of constant currency) to $595 million.

Operating Statistics

Fresenius operated a network of 3,180 dialysis clinics (up 2% year over year) across North America and the overseas markets, as of Mar 31, 2013. The number of clinics increased 2% in North America while offshore dialysis clinics also increased 2% year over year.

Fresenius provided dialysis treatment to 261,648 patients (up 3% year over year) on a global scale, as of Mar 31, 2013. Patients in North America increased 3% whereas number of patients in international markets also ascended 3% year over year.

The company provided 9.7 million dialysis treatments (up 5% year over year) globally, during the quarter ending Mar 31, 2013. Fresenius' North American franchise rose 7% while the international segment improved 2% year over year.

Margins

Operating margin dropped to 14.2% from 15.5% in the prior year quarter. In North America, operating margin was lower at 16.1% from 16.5% a year ago while operating margin for overseas markets decreased to 15.7% from 17.2% in the year-ago period.

Cash Flows

Fresenius concluded the first quarter with cash from operations of $315 million (9.1% of sales), representing a drop of 34% year over year.

The company spent $146 million on capital expenditures in the quarter. Free cash flow, prior to acquisitions, was $169 million versus $359 million a year ago. The company spent $71 million on acquisitions and investments, net of divestitures. Free cash flow, post acquisitions, divestitures and investments, was $98 million compared with $(1167) million in the prior-year period.

Guidance Reaffirmed

Fresenius confirmed its forecast for 2013. The company envisions sales of over $14,600 million for 2013, up 6% year over year. Expected net income (for shareholders) for 2013 is about $1,100 million to $1,200 million, up 5% to 15% (excluding investment gain of $140 million in 2012). The company expects capital expenditure of roughly $700 million and plans to spend around $300 million on acquisitions.

Fresenius is a provider of products and services for patients undergoing dialysis treatment. The company's principal competitor in the U.S. is DaVita HealthCare Partners Inc. ( DVA ), which provides dialysis services for patients suffering from chronic kidney failure or end stage renal disease. Fresenius also competes with Baxter International Inc. ( BAX ).

Despite quarter-to-quarter fluctuations, the company continues to register good operating results in the North American as well as overseas markets. The integration of recent acquisitions is also expected to be accretive to Fresenius' earnings in the near term. However, the contagion of lingering economic problems in Europe remains a matter of concern.

The stock carries a Zacks Rank #3 (Hold). Abiomed, Inc. ( ABMD ) carries a Zacks Rank #2 (Buy) and is expected to do well.



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FRESENIUS MED (FMS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ABMD , BAX , DVA , FMS

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