Dialysis company Fresenius Medical Care (FMS) posted adjusted earnings of $358 million or 58 cents per American Depositary Share or ADS (excluding the impact of sequestration as well as the Liberty acquisition) for the fourth quarter of 2013, topping the Zacks Consensus Estimate by 5 cents per ADS and reflecting a 39% rise in net earnings and 38% increase in earnings per share from $258 million or 42 cents per ADS, respectively in the fourth quarter of 2012.
For full-year 2013, FMS reported a 6.5% fall in net earnings to $1.1 billion and a 6% drop in net earnings per share to $1.83. The decline in full year earnings led to a nearly 2% fall in the company’s shares after the market closed yesterday.
Revenues and Operating Income
Net revenues grew 4% (up 5% in constant currency) year over year to $3,867 million in the reported quarter, marginally exceeding the Zacks Consensus Estimate of $3,846 million. Organic sales grew 3% globally.
On a geographic basis, revenues from North American markets rose 3% to $2,507 million with organic revenue growth of 1.5% in the quarter. Overseas revenues increased 6% (up 8% in constant currency) to $1,351 million with organic growth of 7%.
Dialysis services revenues escalated 3% (up 4% in terms of constant currency) year over year to $2,895 million with North American revenues moving up 3% to $2,288 million (with same store sales growth of 3.4%) and international revenues ascending 4% (up 8% in terms of constant currency) to $607 million.
Dialysis product revenues went up 8% (up 8% in constant currency) year over year to $972 million. Dialysis product revenues in North America rose 6% to $219 million. International dialysis product revenues scaled up 8%, both in reported and constant currency, to $744 million.
Operating income went up 18% to $661 million (17.1% of sales) but adjusted operating income rose 21% to $679 million (17.6%) in the quarter. In North America, operating income scaled up 7% to $446 million (11.5%) but operating income in the international market rose 23% to $261 million (6.7%).
For 2013, revenues improved 6% (both in reported and constant currency) to $14,610 million. Adjusted operating income rose 4% to $2.3 billion (15.8%) in the year.
Financial Condition
FMS concluded the year with total assets of $23,120 million compared with $22,326 million as of Dec 31, 2012. Total debt stood at $8,417 million, up from $8,298 million as of Dec 31, 2012.
In 2013, FMS had cash flow of $2,035 million from operating activities, almost flat compared with $2,039 million in 2012. Capital expenditures (net) rose 9% to $728 million from $666 million in 2012. Consequently, free cash flow went down 4.8% to $1,307 million from $1,373 million a year ago.
2014 Guidance
For 2014, FMS expects revenues of $15,200 million, reflecting a 4% rise from 2013. It expects net income of $1,000–$1,050 million for the year. FMS also expects capital expenditure of roughly $900 million and plans to spend around $400 million on acquisitions.
Our Take
We are encouraged by Fresenius’ earnings and revenue beats for the third quarter but remain concerned about the bleak economic outlook of euro zone 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). Some better-ranked stocks in the medical instruments industry include Cynosure, Inc. (CYNO), Natus Medical Inc. (BABY) and AngioDynamics Inc. (ANGO). Cynosure and Natus Medical have a Zacks Rank #1 (Strong Buy) while AngioDynamics carries a Zacks Rank #2 (Buy).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment