Modest revenue growth
For fiscal 2017, Fresenius Medical Care (FMS) has projected year-over-year (or YoY) revenue growth of 8%–10% over 2016 its IFRS revenues of ~16.6 billion euros. These projections assume a constant currency basis. These projections don’t include the one-time impact of the revenues that will be received as a part of the agreement with the US Department of Veterans Affairs and the Department of Justice.
Fresenius Medical Care comprises ~0.10% of the Vanguard FTSE Europe ETF (VGK).
For fiscal 2017, Wall Street analysts have projected Fresenius Medical Care’s revenues to be close to $20.8 billion, which equals YoY growth of ~16.0%.
In 2017, Fresenius Medical Care’s peers DaVita (DVA), Laboratory Corporation of America Holdings (LH), and Quest Diagnostics (DGX) are expected to earn revenues close to $15.3 billion, $10.0 billion, and $7.7 billion, respectively.
Bad debt expenses
While Fresenius Medical Care’s 1H17 performance was in line with its fiscal 2017 guidance, its earnings were adversely affected by higher personnel expenses, foreign currency fluctuations, and higher bad debt expenses. The increasing bad debt expenses are mainly attributable to certain acquisitions completed by Sound Physicians in the emergency medicine space.
Because Fresenius Medical Care is a majority stakeholder in Sound Physicians, these acquisitions have exposed the company to the relatively riskier patient profile that receives treatment in emergency rooms compared to other inpatient and outpatient admissions.
So, Fresenius Medical Care expects to witness a YoY rise in bad debt expenses in 3Q17 and 4Q17. As the acquisitions annualize by the end of 2017, the company anticipates a gradual flattening in bad debt expenses on a YoY basis.
With the exception of the Sound Physicians account, the company has projected stable bad debt expenses for its Care Coordination segment in 2017.
In the next part, we’ll look at Fresenius Medical Care’s margin growth trends in greater detail.