Here's Why You Should Offload Fresenius Medical Stock Now

Fresenius Medical Care (NYSE:FMS) has had a dismal run on the bourses of late. Over the last three months, the company has added 4.4%, underperforming the broader industry’s gain of 5.2%. The current level is also lower than the S&P 500’s return of 5.5%. A rapidly changing healthcare environment in the United States, a sluggish third quarter, tough regulatory environment, difficulties in collecting trade receivables in foreign legal paradigms and competition in the niche markets have been posing significant challenges to the company. The stock has a Zacks Rank #4 (Sell).

Here we take a sneak peek at the major issues plaguing Fresenius at the moment:

Q3 Debacle

Fresenius ended the third quarter on a dismal note, missing the Zacks Consensus Estimate on both the counts. The misses were led by lackluster performance of the renal pharmaceutical segment, which primarily marred Latin-American revenues. We note that the Health Care Services segment at the region declined 1% year over year.

Stiff Competition

Fresenius has a number of competitors in the field of health care services as well as dialysis products. Tough competition from MedTech majors like DaVita Inc. (NYSE:DVA) is likely to impede the company’s sales opportunities and dent market share.

Unfavorable Regulatory Environment

Fresenius has a solid hold in the markets of North America, Europe, Asia Pacific and Latin America. Thus, the company faces the brunt of stringent regulations in almost every country in which it operates. Furthermore, Fresenius has to fulfill specific legal requirements that include tough antitrust regulations. Violating healthcare or other regulations under public law can result in serious legal repercussions.

Fresenius Medical Care Corporation Price and Consensus

Fresenius Medical Care Corporation Price and Consensus | Fresenius Medical Care Corporation Quote

Overall, the estimate revision trend for Fresenius has been declining. For the current quarter, one analyst moved south compared to no movement in the opposite direction over the last two months. For the full year, two analysts moved down compared to no upward movement. As a result, the Zacks Consensus Estimate for current-quarter earnings declined by 3.2% to 61 cents. Full-year earnings estimates dropped 1.3% to $2.36 per share.

However, acquisitions have been a key catalyst for the company. In an initiative to boost its long-term strategy or the ‘Growth-Strategy 2020’, Fresenius Medical Care recently signed an agreement to acquire all outstanding shares of NxStage Medical (NASDAQ:NXTM) for $30 a share.

Meanwhile, a better-ranked stock in the broader medical sector is PetMed Express (NASDAQ:PETS) , with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The company has a long-term expected earnings growth rate of 10%.

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