UBS downgrades Fresenius Medical Care to “sell,” warns on U.S. dialysis outlook Investing.com -- Fresenius Medical Care AG (ETR:FMEG) was downgraded to “sell” from “neutral” by UBS, which cut its price target to €38 from €43.50, citing both near-term earnings headwinds and longer-term structural risks in the U.S. dialysis market, in a note dated Tuesday. The German healthcare company was trading lower at 4.8% at 04:46 ET (08:46 GMT). Shares closed at €43.79 on Aug. 29, leaving what analysts described as more than 10% downside risk. UBS said Fresenius had staged a sharp turnaround under CEO Helen Giza, who took over in 2022 during a period marked by inflation and staffing pressures. Earnings upgrades and margin recovery helped the stock nearly double to about €50 earlier this year, outperforming the broader European MedTech sector by roughly 50%. But the brokerage warned that momentum has stalled, with consensus estimates for 2025 and 2026 looking too optimistic. The downgrade rests on structural concerns about dialysis volumes in the United States, the company’s largest market. UBS noted that new therapies for chronic kidney disease, including GLP-1s and other drug classes, are slowing disease progression, reducing the number of patients entering dialysis. At the same time, the dialysis population is aging, pushing up mortality rates. Even with the rollout of high-volume hemodiafiltration, which can improve outcomes for some patients, UBS expects U.S. volume growth to peak at 1.5% before turning negative after 2030. That compares unfavorably with consensus models that assume steady growth. 3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Financially, UBS trimmed its forecasts to reflect weaker volumes, foreign exchange headwinds, and rising costs tied to new technology. Revenue is expected to be broadly flat at €19.4 billion in 2025 before gradually rising to €22 billion by 2028. Adjusted EBIT is projected to improve from €1.8 billion in 2024 to €2.6 billion in 2028, with margins climbing from 9.3% to 11.7% over the same period. Earnings per share are seen at €3.43 in 2025, rising to €4.96 in 2028. Dividends are projected to increase from €1.20 in 2025 to €1.74 in 2028, implying a yield close to 4%. Despite those improvements, UBS cautioned that the shares’ valuation does not leave much upside. Fresenius trades at about 13 times forward 2025 earnings, in line with the sector’s two- to three-year average discount. The brokerage’s HOLT analysis found that cash flow returns on investment have fallen from around 15% in 2012 to 3.7% in 2024, while earnings quality has slipped relative to peers. UBS said sustaining the current share price would require a significant uplift in returns, which it views as unlikely now that most of the margin recovery has already been delivered. Should you invest $2,000 in FMEG right now? First, check if it's included in one of this month's AI-powered stock strategies for ProPicks AI. Investing.com created these strategies to identify the most exciting trading opportunities currently in the market. The stocks that made the cut could produce monster returns in the coming years, like ViaSat and Sapiens, both up over 60%+ each in Q2 of 2025 alone. Is FMEG one of them?

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