Fresenius SE Faces Kabi Challenges in Q4 and Gives Underwhelming 2023 Guidance; Shares Remain Cheap

Narrow-moat Fresenius SE's weak fourth quarter pushed results mildly below our 2022 expectations on weakness in its Kabi (injectable therapies) business, despite Fresenius Medical Care's (dialysis) stronger-than-expected results. Also, with continued challenges in dialysis and Kabi, Fresenius SE's 2023 guidance came in below our expectations. However, when considering cash flows generated in recent months, our EUR 52 fair value estimate has not changed materially, and Fresenius SE shares remain significantly undervalued. While we appreciate Fresenius SE's intention to hold onto its 32% stake in Fresenius Medical Care until that firm's intrinsic value can be unlocked, Fresenius SE shares declined after these announcements in part because shareholders may have been hoping for a quicker structural change than appears likely.