Fresenius Medical Care FMS is one of the largest integrated providers of products and services for individuals undergoing dialysis following chronic kidney failure. Through its network of more than 3,600 clinics across the world, the company offers dialysis services and products in more than 120 countries and employs over 109,000 staff in more than 50 countries.

Fresenius Medical reports through two segments — Care Delivery and Care Enablement. The Care Delivery segment consists of the company’s Dialysis Services and the Care-Coordination (non-dialysis laboratory services), which accounted for 79.6% of net revenues in the first half of 2024. The Care Enablement segment comprises the company’s Dialysis machines, dialyzers, dialysis solutions, hemodialysis concentrates, bloodline systems, water treatment systems, dialysis drugs and other medical products. The segment accounted for 20.4% of net revenues in the same period.

FMS’ quarterly results are likely to continue benefiting from improving treatment volumes as well as a stabilizing labor environment in the United States. Overall price improvements also supported growth in the Care Enablement segment. Meanwhile, FMS’ newly implemented operating model led to operational improvements. The company’s divestment of its noncore and dilutive assets looks promising as they will help it focus on its core and growing categories as well as boost its cash resources.

The company’s shares have risen 1.5% year to date compared with the industry’s 8.4% growth. The stock was primarily driven by top-line growth in the past couple of quarters. The S&P 500 Index was up 20% in the same time frame.

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However, U.S. revenues continued to be hurt by FX impact. The bottom line was hurt by inflationary cost increases in energy, material and personnel.

Diversified Product Portfolio Boosts FMS’ Prospects

Fresenius Medical offers a wide array of Hemodialysis, Peritoneal dialysis and Acute dialysis products. To further boost the quality of life for its patients and increase their choice of available treatment options, Fresenius Medical Care remains focused on further expanding its home dialysis offerings. In 2022, the company provided around 15% of its dialysis treatments in the United States in a home setting, the same as last year. By 2025, the company has set a goal to perform 25% of all treatments in the U.S. at a patient’s home.

FMS’ Strong Global Foothold Buoys Optimism

Fresenius Medical has a solid market hold in the regions of North America, Europe (EMEA), Asia Pacific and Latin America. To strengthen its market position, the company is resorting to various approaches, like enhancing its organic growth and making strategic and suitable acquisitions. The company also aims to align its business activities through public-private partnerships in the dialysis business for tapping into new markets in the coming quarters. In the recent past, the company entered the dialysis services market in Israel.

Fresenius Medical also expanded its dialysis services business in India by acquiring an 85% stake in Sandor Nephro Services, a dialysis group, offering dialysis treatment and other associated services, such as laboratory tests, to 308,471 patients in 3,624 dialysis clinics worldwide. In the second quarter of 2024, it witnessed strong contributions from the Asia Pacific, EMEA and Latin America, respectively.

Restructuring Initiatives Driving Savings

In October 2020, Fresenius Medical unveiled its 2025 strategy at its Capital Markets Day. This strategy is an appropriate one as it prioritizes patients’ needs, and the quality of care is in line with key drivers and developments for its industry. This positions Fresenius Medical’s business well to deliver sustainable growth over the medium term and further. The FME25 transformation is anticipated to achieve a substantial amount of savings by 2025.

The company continues to progress with its FME25 transformation. In the second quarter, FMS generated 57 million euros in savings by implementing initiatives under its FME25 transformation program. The company targets savings in the range of 250-300 million euros by 2024-end and 650 million euros by 2025-end.

Factors Hurting FMS Stock

Fresenius Medical has numerous competitors in the field of health care services as well as the sale of dialysis products. Tough competition in the niche markets is likely to impede the company’s sales opportunities and lose market share. However, per management, concerns that arise due to competition represent a low risk for the company in the short and mid-term. The company faces aggressive rivalry from HCA Holdings, DaVita HealthCare and Baxter International.

FMS faces a highly regulated environment in almost every country in which it operates. Furthermore, the company has to fulfill specific legal requirements everywhere, including the tough antitrust regulations. Violating healthcare or other regulations under public law can result in extensive legal repercussions.

Zacks Rank & Stock to Consider

Fresenius Medical Care currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Universal Health Service, Quest Diagnostics and Baxter International, each carrying a Zacks Rank #2 (Buy).

Universal Health Service has an estimated long-term growth rate of 19%. UHS’ earnings surpassed estimates in each of the trailing four quarters, with the average being 14.58%.

Universal Health Service has gained 47% compared with the industry’s 47.7% rise so far this year.

Quest Diagnostics has an estimated long-term growth rate of 6.2%. DGX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 3.31%.

Quest Diagnostics shares have gained 12.3% so far this year compared with the industry’s 19% rise.

Baxter’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 3.74%.

BAX’s shares have declined 6.9% so far this year against the industry’s 13.3% growth.

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