Fresenius Medical Care AG (FMS) (Q4 2024) Earnings Call Highlights: Strong Operating Income ...

Unlock stock picks and a broker-level newsfeed that powers Wall Street. Upgrade Now

GuruFocus News

Wed, Feb 26, 2025, 12:03 AM 4 min read

Revenue Growth: 2% revenue growth for 2024, accounting for a 1.6% headwind from divestments.
Operating Income Growth: 18% growth at the upper end of the earnings outlook for 2024.
Operating Income Margin: Improved to 9.6% in Q4 2024 from 7.7% in the previous year.
Care Delivery Margin: Over 10% for full year 2024.
Care Enablement Margin: Improved to 6.1% for full year 2024, nearly tripling from the previous year.
FME25 Savings: EUR567 million in sustainable savings achieved through 2024, with a new target of EUR750 million by the end of 2025.
Dividend Proposal: EUR1.44, reflecting a 13% compound annual growth rate over the past two years.
Leverage Ratio: Improved to 2.9 times, below the self-imposed target range.
Organic Revenue Growth: 7.4% in Q4 2024.
Same-Market Treatment Growth (US): 0.5% in Q4 2024, adjusted for the exit of acute care contracts.
Operating Cash Flow: 16% increase in Q4 2024.
Care Delivery Revenue Growth: 3% on an outlook base in Q4 2024, with 6% organic growth.
Care Enablement Revenue Growth: 10% on an outlook base in Q4 2024, with 10% organic growth.
2025 Revenue Outlook: Positive to low single-digit percent growth, including a 1% headwind from portfolio optimization.
2025 Operating Income Growth Outlook: High teens to high 20%s growth range, with an implied margin of around 11% to 12%.

Warning! GuruFocus has detected 9 Warning Signs with FMS.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Fresenius Medical Care AG (NYSE:FMS) achieved a significant improvement in operating income, with a 31% growth in the fourth quarter, driven by both care delivery and care enablement segments.
The company raised its total savings target from EUR650 million to EUR750 million by the end of 2025, due to the momentum in the FME25 transformation program.
Fresenius Medical Care AG (NYSE:FMS) plans to propose a dividend increase of 21%, reflecting a strong commitment to shareholder returns.
The company reported a strong net promoter score of 72, indicating high patient satisfaction with the quality of its services.
Fresenius Medical Care AG (NYSE:FMS) achieved 4% organic growth and reached the upper end of its earnings outlook for 2024, demonstrating effective execution of its strategic plan.

Negative Points

The company continues to experience elevated mortality rates in the United States, which impacts overall treatment volumes.
Fresenius Medical Care AG (NYSE:FMS) faced a 1.6% revenue headwind from divestments in 2024, affecting overall revenue growth.
The value-based care business contributed negatively to the bottom line, with a negative EBIT contribution of EUR20 million to EUR40 million.
The company anticipates a net labor headwind of EUR150 million to EUR200 million in 2025, primarily due to wage inflation.
Fresenius Medical Care AG (NYSE:FMS) expects a 1% revenue headwind in 2025 from the successful execution of its portfolio optimization plan, which includes divestitures.

Q & A Highlights

Q: Can you provide some color on your expectations for segment margins in 2025 and the phasing of these improvements? A: We are not guiding to specific segment margins for 2025 but expect both segments to progress along their margin bands. Care Enablement showed a significant step-up in Q4, reaching 7.8%, and we anticipate continued improvement. For same-market treatment growth, we are optimistic about the progress made, moving from 0.2% in Q3 to 0.5% in Q4, and expect further acceleration throughout the year.

Q: How do you expect the US market to exit in 2025 in terms of volume growth, and can you comment on the divestitures mentioned in your presentation? A: We expect volume to ramp up through the year, with a return to 2% growth in 2026 once elevated mortality normalizes. Regarding divestitures, not all assets in the assessed area are slated for divestment; some are strategically valuable. We will provide further updates at our Capital Markets Day in June.

Q: What is the potential impact of the increased ACA insurance subsidies ending, and how will the shift of phosphate binders into clinic reimbursement affect FreseniusRx? A: The end of ACA subsidies could result in a below 2% EBIT impact if patients shift to Medicare. For phosphate binders, the shift into the bundle will negatively impact the pharmacy but positively affect our pharma business, with an estimated net benefit of EUR100 million in 2025.

Q: Does your guidance include contributions from the 5008X launch, and what are your expectations for excess mortality rates? A: The 5008X launch is expected to have minimal impact on 2025 guidance as the full commercial launch is planned for 2026. Excess mortality remains elevated, with a slight improvement in the second half of 2024, but still higher than desired.

Q: Can you elaborate on the additional savings from the FME25 program and the main areas of labor cost inflation? A: The FME25 program has accelerated, with savings driven by efficient functional setups and care enablement improvements. Labor cost inflation is managed through efficiencies and wage management, with a net 3% increase expected as headcount normalizes.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice

More Info