Fresenius Med. Care: Solid organic growth but US margins affected
BUY, Fair Value EUR53.5 (+11%)
Fresenius Medical Care released mixed Q2 figures with strong organic growth of 5% (Q1: 4%) while margins were affected by higher operating expenses in the US. US dialysis care grew 6% (4% same store growth) with revenue per treatment at USD355 (-1.1% sequentially, +0.9% y/y) a strong resistance despite the implementation of sequestration in Q2. Dialysis products (+5% CER) rebounded following a weak Q1 (+2% CER) with growth in the US and internationally. With sales in line with consensus, disappointment comes from margins which were roughly 4% below expectations mainly driven by an increase in SG&A in the US. There is no doubt that the Global efficiency plan that FMC is launching will be under scrutiny. Sales guidance is maintained (USD>14.6bn) while net income guidance is slightly adjusted in the lower range at USD1.1bn-USD1.15bn but we do not expect major figure revisions. One focus of the conference call should definitely be on proposed Medicare cuts as well as the cost efficiency programme.
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