Drop in net profit margins

For fiscal 2017, Fresenius Medical Care (FMS) has projected year-over-year (or YoY) growth in operating income in the range of 7%–9% over its 2016 IFRS operating income of around 1.1 billion euros. In 1H17, the company witnessed a YoY drop of 70 basis points on a reported basis and 60 basis points on a constant currency basis in operating income margins from 13.5% to 12.8%.

Fresenius Medical Care’s Net Profit Margins Could Fall Slightly

For fiscal 2017, Wall Street analysts have projected Fresenius Medical Care’s net profit margins to be close to 6.2%, which is a YoY decline of ~70 basis points.

In 2017, Fresenius Medical Care’s peers DaVita (DVA), Laboratory Corporation of America Holdings (LH), and Quest Diagnostics (DGX) are expected to report net profit margins close to 6.0%, 8.2%, and 9.2%, respectively.

Foreign currency translation impact

In 2Q17, Fresenius Medical Care witnessed a YoY drop of 100 basis points in operating income margins from 14.2% to 13.2%. An ~70 basis point decline in margins is attributed to currency translation effects due to the strengthening of the euro against the US dollar, Chinese yuan, Turkish lira, Russian ruble, and Brazilian real.

In 2Q17, the company witnessed a 7% drop in constant current earnings after tax (or EAT) growth. In the absence of foreign currency transaction effects, Fresenius Medical Care would have reported a 9% rise in EAT in 2Q17.

Because Fresenius Medical Care does not completely hedge away its foreign currency risk, this may affect the company’s operating margins in future quarters. This may have an adverse impact on the company’s stock price as well as the Vanguard FTSE All-World ex-US ETF (VEU). Fresenius Medical Care comprises ~0.05% of VEU’s total portfolio holdings.

In the next article, we’ll discuss the growth trends for Fresenius Medical Care in the North American market.

Latest articles

German chip maker Infineon Technologies has reportedly raised 1.55 billion euros (~$1.74 billion) in capital by selling its shares to fund its acquisition of Cypress Semiconductor (CY). Infineon has sold ~113 million new shares at 13.70 euros each.

As of June 18, Dunkin’ Brands (DNKN) was trading at $80.07, an 8.9% rise since reporting its first-quarter earnings on May 2. Also, DNKN was trading at a premium of 29.8% from its 52-week low of $61.69 and a discount of 1.6% from its 52-week high of $81.40.

19 Jun

Are Lower Oil Prices Weighing on ExxonMobil Stock?

WRITTEN BY Maitali Ramkumar

ExxonMobil (XOM) stock has fallen 7.1% in the second quarter so far. Let's review ExxonMobil's stock performance in comparison to oil price changes and equity market movements in the quarter.

19 Jun

As Facebook Unveils Libra, MSFT and CRM Join a Blockchain Group

WRITTEN BY Mayur Sontakke, CFA, FRM

On June 18, Facebook (FB) launched Libra, its own cryptocurrency. On the same day, CoinDesk published another piece of blockchain news that didn’t receive as much fanfare as Facebook’s Libra news. Was the timing a coincidence? We think not.

Uber Technologies (UBER) has picked Melbourne as another test site for its flying taxi service known as UberAir. The Australian city is the first international test site Uber has chosen for its flying taxi service. The addition of Melbourne brings the number of test locations Uber has picked for its UberAir service to three.

Lyft (LYFT) and Uber Technologies (UBER) are pushing back against California legislation that would require them to recognize their drivers as employees rather than independent contractors. The legislation would require companies like Lyft to give their drivers the compensation and benefits spelled out under California’s employment regulations.