Fresenius' 4Q EPS Meets, Sales Miss - Analyst Blog
February 22 2012 - 4:15AM
Zacks
Fresenius Medical
Care (FMS), the world's largest dialysis company, posted
fourth-quarter 2011 earnings per share of $1.02, in line with the
Zacks Consensus Estimate while exceeding the year-ago earnings of
90 cents. Net income (attributable to the company) shot up 14% year
over year to $310 million on the back of higher revenues.
For the year, earnings of $3.54 a
share missed the Zacks Consensus Estimate by a penny while
surpassing the year-ago earnings of $3.25. Profit (attributable to
the company) climbed 9% year over year to $1,071 million.
Revenue
Analysis
Net revenues rose 5% (up 6% at
constant currency) year over year to $3,323 million, but missed the
Zacks Consensus Estimate of $3,382 million. Organic revenue growth
was 3% on a global basis. For the full year, revenues rose 6% year
over year to $12,795 million, also below the Zacks Consensus
Estimate of $12,871 million.
Geographically, revenues from the
North American markets crept up 1% to $2,096 million in the fourth
quarter while overseas revenues jumped 12% (up 14% at constant
currency) to $1,223 million.
International sales were boosted by
double-digit growth in dialysis product and services revenues while
domestic revenues were hurt by the negative impact of the
implementation of the new Medicare end-stage renal disease
prospective payment system (the “bundled rate” system), which
resulted in lower reimbursement.
Dialysis services revenues nudged
up 3% year over year to $2,435 million with domestic and
international sales rising 1% and 13%, respectively, to $1,882
million and $553 million. Average revenue per treatment for
domestic clinics declined to $351 from $355 a year ago, impacted by
reduced Medicare reimbursement.
Consolidated dialysis product
revenues spiked 9% year over year to $888 million. Dialysis product
sales in domestic markets grew just 2% to $214 million as higher
sales of hemodialysis products were, in part, neutralized by
pricing cuts on renal drugs.
International dialysis product
sales jumped 11% to $669 million, boosted by higher sales of
peritoneal dialysis products, dialyzers, dialysis machines and
products for acute care treatments.
Operating
Statistics
Fresenius operated a network of
2,898 dialysis clinics (up 6% year over year) across North America
and the overseas markets at the end of 2011. It has provided
dialysis treatment to 233,156 patients (up 9% year over year)
worldwide as of December 31, 2011. During the year, the company
provided roughly 34.39 million dialysis treatments globally, up 9%
year over year.
Margins
Operating margin rose to 17.7% from
17% a year ago. In North America, operating margin climbed to 19.1%
from 17.9% driven by favorable pharma costs. Operating margin for
overseas markets increased to 18.7% from 18% helped by favorable
currency exchange movements and growth in Asia-Pacific.
Cash Flows
Fresenius generated operating cash
flows of $497 million (roughly 15% of sales) in the fourth quarter,
a 46% year-over-year surge. The company spent $191 million on
capital expenditure in the quarter. Free cash flows (prior to
acquisitions) soared 77% year over year to $306 million. Fresenius
spent $1,775 million on acquisitions in 2011.
Acquisitions
Fresenius, on October 1, 2011,
closed its acquisition of U.S. based American Access Care Holdings
for $385 million. American Access runs outpatient clinics, which
serve the vascular access needs of dialysis patients. The
acquisition is expected to contribute roughly $175 million in
annual sales. Fresenius is also on track to close its $1.7
billion acquisition (expected in first-quarter 2012) of leading
dialysis company Liberty Dialysis Holdings Inc.
Guidance
Moving ahead, Fresenius envisions
sales of roughly $14 billion for 2012, taking into account certain
accounting changes. This represents a roughly 11% increase from the
comparable sales of 2011. The current Zacks Consensus Estimate for
2012 is $14,359 million.
Net income for the year is expected
at $1.3 billion and net income (attributable to shareholders) is
pegged at $1.14 billion. Operating margin is expected to be around
16.9%. The company expects capital expenditure of roughly $700
million and expects to spend around $1.8 billion on
acquisitions.
Fresenius Medical, which employs
79,159 people globally, is the largest provider of products and
services for patients undergoing dialysis treatment on the planet.
The company’s principal competitor in the U.S. is DaVita
Inc. (DVA), which provides dialysis services for patients
suffering from chronic kidney failure or end stage renal
disease.
DAVITA INC (DVA): Free Stock Analysis Report
FRESENIUS MED (FMS): Free Stock Analysis Report
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