Core Insights - The U.S. medical instrument and medtech sector is stabilizing as it enters 2026, with normalized procedure volumes post-pandemic and a focus on productivity and cost management [1][3] - Companies that can demonstrate operational improvements and earnings visibility are favored in the current investment environment, despite modest top-line growth [1][6] U.S. Macro Trends - Medtech equities are influenced by U.S. macroeconomic factors, particularly the Federal Reserve's interest rate policy, which is currently targeted between 3.5% and 3.75% [3] - Elevated labor and materials inflation rates have moderated, impacting margins more than demand, as companies align pricing and productivity with cost structures [4] Hospital Dynamics - U.S. hospitals are managing tight capital budgets while maintaining steady procedure volumes, benefiting companies with strong service and consumables revenue rather than those reliant on large equipment sales [5] - Staffing shortages are driving hospitals towards automation and efficiency, creating opportunities for device manufacturers offering productivity-enhancing solutions [5] Investment Opportunities in Undervalued Stocks - Undervalued medtech stocks may outperform through earnings recovery and multiple re-rating, as historical periods of uncertainty often compress valuations [6][7] - "Undervalued" stocks are defined as those trading below their historical valuation ranges, with potential for earnings growth through operational leverage and cost-reduction initiatives [7] Company-Specific Insights Fresenius Medical Care (FMS) - FMS is experiencing margin recovery due to cost savings and pricing improvements, with a current P/S F12M of 0.55x, below its 5-year median of 0.63x [10][11] - The company reported a rise in operating margin to 11.7% for Q3 2025, supported by cost savings and disciplined execution, with an expected earnings growth of 9% in 2026 [11][13] Integra LifeSciences (IART) - IART operates in neurosurgery and surgical instruments, currently trading at a P/S F12M of 0.59x, below its 5-year median of 2.14x [14][15] - The company anticipates supply normalization and margin expansion initiatives targeting $25-$30 million in savings, with expected earnings growth of 5.5% in 2026 [15][16] STERIS (STE) - STERIS provides sterilization services and is currently trading at a P/S F12M of 4.23x, slightly above its 5-year median of 3.97x [18][19] - The company reported high-single-digit organic revenue growth and expanded EBIT margin to 23.1%, with an expected earnings growth of 8.6% in 2026 [19][21]

Group 1 - U.S. stock futures are lower, with Dow futures down approximately 100 points [1] - Glaukos Corp reported preliminary FY25 sales of $507 million, leading to a 12.1% drop in shares to $96.97 in pre-market trading [1] Group 2 - Briacell Therapeutics Corp experienced a significant decline of 53.1% to $5.12 after announcing a $30 million public offering [2] - Trip.com Group Ltd shares fell 9.3% to $68.55 amid an investigation by China's SAMR for potential anti-monopoly violations [2] - Pearson PLC shares decreased by 7.2% to $13.36 following a trading update for 2025 [2] - Olema Pharmaceuticals Inc shares declined 5.5% to $26.37 after a previous drop of 3% [2] - Fresenius Medical Care AG shares fell 4.8% to $21.79 [2] - Ambitions Enterprise Management Co LLC shares dropped 4.3% to $11.81 after a significant increase of 134% the previous day [2] - NovaBay Pharmaceuticals Inc shares decreased by 3.8% to $12.55 following a 3% drop on Tuesday [2] - SmartRent Inc shares fell 2.3% to $1.74 in pre-market trading [2]

Company Overview - Fresenius Medical Care is currently stronger and more resilient, with a clear strategy aimed at driving profitable growth and long-term value creation [3] - The company has embarked on its strategy, with 2026 identified as a significant transition year, focusing on setting a new standard of care in the United States through a large-scale conversion of clinics with a new therapy [3] Industry Insights - The fundamentals of the kidney care industry remain intact, largely unaffected by broader macroeconomic cycles [5] - Structural drivers such as an aging population, chronic conditions like hypertension and diabetes, and increased recognition of chronic kidney disease as a public health crisis continue to support global demand for kidney care services [5]

Summary of Fresenius Medical Care FY Conference Call Company Overview - **Company**: Fresenius Medical Care (NYSE: FMS) - **Industry**: Kidney care and dialysis services Core Points and Arguments 1. **Strategic Direction**: Fresenius Medical Care is focused on driving profitable growth and long-term value creation, with 2026 marked as a transition year for implementing a new standard of care in the U.S. through large-scale clinic conversions to a new therapy [2][12] 2. **Industry Fundamentals**: The kidney care industry fundamentals remain strong, driven by an aging population and chronic conditions like hypertension and diabetes, which support global demand for kidney replacement therapies [3] 3. **Pharmaceutical Advancements**: New drugs, particularly GLP-1s, show promise in improving cardiovascular health and reducing mortality in chronic kidney disease (CKD) patients, with a reported 23% improvement in mortality for dialysis patients using these drugs [4] 4. **Market Position**: Fresenius Medical Care is a market leader with over 290,000 patients and 3,600 clinics globally, managing over $7 billion in medical costs and holding a 40% market share in in-center hemodialysis (HD) products [5] 5. **Operational Efficiency**: The company has improved its operating margin from 7.9% in 2022 to 10.3% in 2025, supported by the FME25+ transformation program, which is expected to deliver €790 million in sustainable savings by 2025 [8] 6. **Shareholder Returns**: The 2024 dividend payment was the highest in company history, reflecting a 13% CAGR since 2022, alongside a €1 billion share buyback program initiated in 2025 [9] 7. **Debt Management**: The net leverage ratio has been reduced from 3.4 times in 2022 to 2.6 times by Q3 2025, indicating improved financial health [10] 8. **FME Reignite Strategy**: This new strategy aims to enhance core operations, drive growth and innovation, and strengthen company culture, with aspirations for mid-teen margins by 2030 [12][13] Additional Important Insights 1. **Patient Care Focus**: The company is addressing patient outflow issues by enhancing treatment adherence and reducing missed treatments, which have been exacerbated post-COVID [29][30] 2. **HDF Therapy Rollout**: The introduction of high-volume HDF therapy is expected to significantly improve patient outcomes, with a target to convert 20% of machines in clinics by 2026 [19][20] 3. **Market Dynamics**: The company is navigating challenges such as elevated mortality rates and missed treatments, while also adapting to changes in ACA subsidies that may impact patient behavior [26][35] 4. **Innovation Pipeline**: The 5008X machine rollout is a key innovation, with production capacity of 15,000 machines per year, aimed at enhancing patient care and operational efficiency [17][45] 5. **Long-term Growth Outlook**: The company anticipates robust cash flow generation, projecting operating cash flow above €2.5 billion annually through 2030, supporting its growth and shareholder return strategies [23][27] This summary encapsulates the key points discussed during the Fresenius Medical Care FY Conference, highlighting the company's strategic initiatives, market position, and outlook for future growth.

Core Insights - Investors in the Medical - Instruments sector may consider Fresenius (FMS) or Masimo (MASI) as potential undervalued stocks [1] Valuation Metrics - Fresenius has a Zacks Rank of 2 (Buy), indicating a more favorable earnings estimate revision trend compared to Masimo, which has a Zacks Rank of 4 (Sell) [3] - FMS has a forward P/E ratio of 9.26, significantly lower than MASI's forward P/E of 23.98, suggesting that FMS may be undervalued [5] - The PEG ratio for FMS is 0.73, while MASI's PEG ratio is 1.41, indicating that FMS has a better valuation relative to its expected earnings growth [5] - FMS has a P/B ratio of 0.82, contrasting with MASI's P/B of 9.15, further supporting the notion that FMS is undervalued [6] - Based on these metrics, FMS has a Value grade of B, while MASI has a Value grade of C, indicating a stronger valuation profile for FMS [6] Earnings Outlook - FMS is currently exhibiting an improving earnings outlook, which enhances its attractiveness in the Zacks Rank model [7]

Core Viewpoint - Fresenius Medical Care (FME) is accelerating its share buyback program, initiating the second tranche of a total EUR 1 billion buyback plan, with approximately EUR 415 million allocated for repurchase from January 12 to May 8, 2026 [1][8]. Group 1: Share Buyback Program - The first tranche of the share buyback program was completed ahead of schedule on December 29, 2025 [2]. - The total volume of the share buyback program is EUR 1 billion, and it is expected to be completed significantly earlier than originally planned, in less than a year [2][8]. - The second tranche is set to be executed by May 8, 2026 [8]. Group 2: Financial Performance and Strategy - The acceleration of the share buyback program is supported by strong financial performance and consistent execution of the 'FME Reignite' strategy, focusing on value creation and shareholder returns [3]. - Strong cash-flow generation, driven by continued business momentum, enables the acceleration of the share buyback program, showcasing the effectiveness of the new capital allocation framework [3]. Group 3: Company Overview - Fresenius Medical Care is the leading provider of products and services for individuals with renal diseases, serving around 4.2 million patients worldwide who regularly undergo dialysis treatment [4]. - The company operates a network of 3,628 dialysis clinics, providing treatments for approximately 294,000 patients globally [4]. - Fresenius Medical Care is listed on both the Frankfurt Stock Exchange (FME) and the New York Stock Exchange (FMS) [4].

Core Viewpoint - The appointment of Dr. Charles Hugh-Jones as Global Chief Medical Officer of Fresenius Medical Care signals a shift in the dialysis and kidney care industry, where competition is moving from "equipment performance" to "medical systems and long-term efficacy management" [2]. Group 1: Fresenius Medical Care's Role - Fresenius Medical Care is not just a device manufacturer but provides a comprehensive life support system for chronic kidney disease patients, covering dialysis equipment, consumables, and service networks [3][4]. - The company's responsibilities extend beyond merely selling equipment to hospitals; it must maintain high stability in long-term safety, treatment consistency, and care quality [4]. Group 2: Transition from Maddux to Hugh-Jones - Dr. Franklin W. Maddux, who served as Global Chief Medical Officer since 2020, oversaw a period where the dialysis industry increasingly emphasized real-world evidence, long-term follow-up, and clinical quality management [5][7]. - Dr. Hugh-Jones brings a diverse background from Allergan, Pfizer, and Sanofi, aligning with a trend where chronic disease management is integrating broader medical strategies and data systems [9]. Group 3: Why "Medical Leadership" is Being Highlighted - The technological ceiling for dialysis devices is approaching, with differentiation increasingly based on long-term complication management, patient quality of life, and systemic care capabilities rather than single-treatment outcomes [11]. - Regulatory and payment systems are demanding clearer evidence of "clinical value," transforming the medical department from a compliance supporter to a builder of evidence systems [12]. - Data and services are reshaping the boundaries of device companies, pushing dialysis from "standardized device treatment" to "continuous medical services," necessitating deeper integration of medical decision-making into product and system design [13][14]. Group 4: Implications for the Medical Device Industry - The appointment of Hugh-Jones reflects a broader industry trend where medical functions are gaining strategic importance, especially in chronic disease management and long-term life support systems [15]. - Companies are increasingly recognizing that when product lifecycles span years, medical judgment becomes a critical component of product competitiveness [16].

Core Insights - The article discusses the expertise of a senior analyst and private portfolio manager with over 10 years of experience in generating value ideas in European and North American markets [1] Group 1: Analyst Background - The analyst is a contributing author and analyst for the investing group iREIT®+HOYA Capital and Wide Moat Research LLC, covering various European markets including Scandinavia, Germany, France, UK, Italy, Spain, Portugal, and Eastern Europe [1] - The focus is on identifying reasonably valued stock ideas within these markets [1] Group 2: Investment Position - The analyst holds a beneficial long position in the shares of FMS and FSNUY, either through stock ownership, options, or other derivatives [1]

Core Insights - Fresenius Medical Care AG & Co. (FMS) reported third-quarter 2025 adjusted earnings per share (EPS) of 64 cents, exceeding the Zacks Consensus Estimate by 8.47% and reflecting a year-over-year increase of 35.8% [1][7] - Revenues reached $5.71 billion (EUR 4,885 million), surpassing the Zacks Consensus Estimate by 4.3%, with a year-over-year growth of 2.6% and an organic growth of 10% [2][7] Revenue Details - The revenue growth was impacted by divestitures as part of the portfolio optimization plan, which negatively affected revenue by EUR 50 million in Q3 [3] - Full-year revenue is expected to reflect a 100 basis points negative impact due to the portfolio optimization plan in 2024 [3] Segment Performance - Care Delivery segment revenues decreased by 2% year-over-year but increased by 3.6% at constant currency (cc) and 6% organically [5] - Care Enablement segment revenues remained flat year-over-year but grew by 5% at cc and organically [8] - Value-Based Care segment revenues surged by 34% year-over-year, with a 42% increase at cc and organically, driven by a higher number of member months due to contract expansion [9] Margin Analysis - Gross profit improved by 8.4% year-over-year, with gross margin expanding by 130 basis points to 25.4% [10] - Adjusted operating income increased by 22.4% from the prior-year quarter, with the adjusted operating margin expanding by 180 basis points to 11.7% [10] Future Guidance - For 2025, Fresenius Medical expects positive revenue growth at a low-single-digit percent rate compared to the prior year and operating income growth in the high-teens to high-twenties percent range [11] Strategic Initiatives - The FME25 transformation program delivered EUR 47 million in additional sustainable savings during Q3, with a target of around EUR 180 million in additional annual savings by the end of 2027 [13] - Continued divestment of non-core and dilutive assets is seen as a positive move to focus on core categories and enhance cash resources [14]

Financial Data and Key Metrics Changes - The company achieved strong organic revenue growth of 10% in Q3 2025, with all three operating segments contributing positively [7][26] - Operating income growth accelerated to 28%, resulting in an operating income margin expansion from 9.9% to 11.7% [8][27] - Operating income, excluding special items, increased by 28% on a constant currency basis, with special items negatively affecting operating income by around EUR 100 million [27][28] Business Line Data and Key Metrics Changes - Care Delivery realized organic revenue growth of 6%, with U.S. organic growth driven by favorable rate and payer mix development [30][32] - Value Based Care segment saw a significant 42% organic growth, primarily due to a high number of member months and a change in revenue recognition [34] - Care Enablement achieved a 5% organic growth, supported by solid volume growth and positive pricing momentum [35] Market Data and Key Metrics Changes - In the U.S., same market treatment growth was slightly positive at 0.1%, reflecting the carryover effect from elevated mortality due to a severe flu season [18][32] - Internationally, same market treatment growth increased to 1.2% [18] Company Strategy and Development Direction - The company is focused on its SME Reignite strategy to drive growth and innovation, enhancing clinical outcomes and patient safety [12][16] - The initial share buyback of EUR 1 billion aligns with the commitment to reignite value creation for shareholders [8] - The company is preparing for the rollout of high volume HDF treatments, which is expected to set a new standard of care in the U.S. [10][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the full-year guidance, with expectations for continued improvement in underlying business despite a challenging environment [41][43] - The company anticipates further acceleration in earnings growth and margin expansion in Q4, supported by positive momentum from the FME25 plus program [42][43] - Management acknowledged the need to navigate various uncertainties, including potential impacts from Medicare Advantage trends and ACA tax subsidies [44][63] Other Important Information - The company reported a total investment of EUR 188 million in share repurchases by October 31, 2025 [10][38] - Operating cash flow increased by 8% year-to-date, despite a decline in Q3 compared to an inflated prior year base [37] Q&A Session Summary Question: Guidance on margin expectations and treatment adherence - Management expects continuous improvement across all segments, with strong support from Care Delivery [51] - Elevated mortality levels are still a concern, but improvements in missed treatments are being observed, which should help with overall treatment volume and mortality [52][54] Question: Phosphate binders and Medicare Advantage trends - The company now expects a total benefit of EUR 180 million from phosphate binders for the year, up from the previous guidance of EUR 100 million [58][60] - Current Medicare Advantage enrollment remains steady, with no significant impact anticipated from recent market changes [62][64] Question: EBIT guidance and treatment growth - The EBIT guidance remains wide due to various moving parts, but management is optimistic about achieving the top end of the range [68] - Improvements in admissions and mistreatments are being noted, with expectations for treatment growth to normalize as mortality levels decrease [70][74] Question: HDF rollout and its impact - The rollout of HDF is progressing well, with positive feedback from nephrologists and plans for further installations [82] - The company anticipates that HDF will start to positively impact U.S. treatment growth as patients begin to receive this treatment [102]