Fresenius Medical Care AG & Co. KGaA (NYSE: FMS) shares followed an ascendant trajectory during Friday’s trading, culminating in a 1.67% increase to conclude the regular session at $20.07. Subsequently, the upward momentum persisted in after-hours trading, with Fresenius stock surging an additional 5.83% to reach $21.24. This rally was spurred by a favorable analyst upgrade for FMS stock, as HSBC Securities elevated its recommendation from “Sell” to “Hold” on Friday.
Simultaneously, Fresenius (FMS) successfully resolved a legal dispute with the U.S. government regarding accounts receivable in contention. Lately, the corporation completed a firm resolution deal, guaranteeing an upcoming payout from the United States authorities. This conclusion arises from a 2019 accusation initiated by Fresenius against the U.S., aiming to retrieve funds due from the U.S. Department of Defense in connection with the Tricare initiative for services provided on or prior to January 11, 2023.
Tricare facilitates reimbursement for dialysis treatments and other medical care extended to members of the military services, their dependents, and retirees. The legal challenge focused on undisclosed administrative actions by Tricare administrators, who opted to reduce compensation rates for dialysis treatments provided to Tricare beneficiaries by revising invoicing codes. Despite the acknowledgment of this administrative action by Tricare administrators, they chose not to revise or abandon it.
The recently executed settlement agreement successfully resolves the underlying dispute and brings the litigation to a close. As a result, both revenue and operating income for Fresenius are expected to experience a positive impact. In prior reporting periods, the negative repercussions of this matter were not treated as a special item due to its operational nature. Consequently, Fresenius anticipates a net positive impact on operating income of approximately EUR 175 million in the fourth quarter of 2023.
In tandem with the settlement agreement, Fresenius has revised its earnings outlook, now expecting a 12 to 14 percent growth in operating income for the fiscal year 2023 compared to the previous year. Notably, all other aspects of the 2023 outlook, as previously disclosed, remain unchanged.
