Fresenius Medical (FMS) Divests Assets to Optimize Portfolio
Fresenius Medical Care AG FMS recently announced the sale of its dialysis clinic networks in Brazil, Colombia, Chile and Ecuador to DaVita Inc. The transactions, subject to regulatory approvals in Brazil, Colombia and Ecuador, represent a milestone in the company’s portfolio optimization program.
The transactions, which are expected to close throughout 2024, are expected to further reduce Fresenius Medical’s clinic footprint in Latin America as this follows its exit from Argentina at the end of 2023.
The latest divestment is expected to significantly boost FMS’ portfolio optimization program and boost its business.
Rationale Behind the Divestment
Per Fresenius Medical’s estimates, these four separate transactions, in aggregate, represent 154 dialysis clinics and more than 30,000 dialysis patients.
Per management, the divestment of assets will likely optimize Fresenius Medical’s portfolio, reduce complexity and improve profitability. The company is expected to use the proceeds to reduce its debt.
Industry Prospects
Per a report by Precedence Research, the global end-stage renal disease market was estimated to be $105.22 billion in 2022 and is anticipated to reach $372.31 billion by 2032 at a CAGR of approximately 13.5%. Factors like the increase in kidney failure patients and the introduction of technologically advanced products are expected to drive the market.
Given the market potential, the latest divestment is expected to significantly boost Fresenius Medical’s business.
Notable Developments
Last month, Fresenius Medical reported its fourth-quarter 2023 results, wherein it registered a solid bottom-line performance. Its overall revenues and Care Delivery and Care Enablement segments’ revenues were up both on constant currency and organic basis. Its quarterly results reflected strong organic growth on the back of improving treatment volumes and a stabilizing labor environment in the United States. Overall price improvements also supported growth in the Care Enablement segment.
In the same month, FMS announced the receipt of the FDA’s 510(k) clearance for its 5008X Hemodialysis System.
Price Performance
Shares of Fresenius Medical have gained 2.7% in the past year compared with the industry’s 16.6% growth and the S&P 500’s 32.9% rise.
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Zacks Rank & Key Picks
Currently, Fresenius Medical carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader medical space are Zimmer Biomet Holdings, Inc. ZBH, Cardinal Health, Inc. CAH and Cencora, Inc. COR.
Zimmer Biomet, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 7.2%. ZBH’s earnings surpassed estimates in three of the trailing four quarters and broke even once, with the average surprise being 4.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zimmer Biomet’s shares have gained 2% compared with the industry’s 11.3% growth in the past year.
Cardinal Health, flaunting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 14.2%. CAH’s earnings surpassed estimates in each of the trailing four quarters, with the average being 15.6%.
Cardinal Health has gained 64.3% compared with the industry’s 18.3% growth in the past year.
Cencora, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 9.8%. COR’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 6.7%.
Cencora’s shares have rallied 60.1% compared with the industry’s 7.7% growth in the past year.
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