Trump's Order On Kidney Care Lifts These Dialysis Stocks

President Donald Trump recently signed an executive order aimed at reforming kidney treatment for over 37 million Americans suffering from any kind of kidney ailment. The Trump administration stated that it is the first kidney-centric executive order since 1973. By the way, Trump’s executive order is also designed to save the U.S. government millions of dollars, according to the administration officials. After all, more than $110 billion a year is required for treating this deadly disease, per government data.

So, what will the executive order do? It will develop new payment models to encourage more kidney transplants and provide affordable alternative treatments including at-home dialysis treatments instead of more expensive treatment centers.

Trump said in a speech in Washington that “We’re taking groundbreaking action to bring new hope to millions of Americans suffering from Kidney disease.” Needless to say that nearly 30 million Americans are currently suffering from chronic kidney disease and shockingly many are not even diagnosed, according to the Centers for Disease Control and Prevention.

Trump’s executive order comes two days after a federal judge in Washington, D.C. rejected the government’s rule that would have compelled drug manufacturers to disclose the list price of their drugs in television ads. The Trump administration has also instructed hospitals and insurers to disclose negotiating rates for services. Notably, higher health-care cost has become a nightmare for individuals and the Trump administration is making every effort to lower prices for consumers, keeping 2020 elections in mind.

Nonetheless, the push for at-home care fits the business models of dialysis giants DaVita Inc. (NYSE:DVA) and Fresenius Medical Care AG & Co. KGaA (NYSE:FMS) . DaVita’s new CEO Javier Rodriguez has already said that the company has been investing heavily in kidney care expansion.

Rodriguez said “We been investing in capabilities to deliver holistic care that addresses our patients' needs beyond kidney disease, such as mental health, social services and nutrition.” Rodriguez also added “We will continue to work with the Administration and Congress to launch programs that address broader care opportunities.”

Fresenius, in the meantime, stated that it is working on remote health monitoring, predictive analytics and algorithmic clinical insights to help individuals in need of medical attention, and help reduce “unnecessary as well as costly hospitalizations.”

Shares of DaVita and Fresenius ticked up 4% and 2.5% following Trump’s signing of the executive order on Jul 10. In fact, DaVita’s expected earnings growth for the current year is 18.5% compared with the Medical - Outpatient and Home Healthcare industry’s projected rally of 10.4%.

Similarly, Fresenius which is part of the Medical - Instruments industry is widely expected to notch an earnings growth of 5.7% for the current year.

The executive order also boosts business for companies like Baxter International Inc. (NYSE:BAX) , Amgen Inc. (NASDAQ:AMGN) and CVS Health Corporation (NYSE:CVS) , to name a few.

Baxter International is known for offering peritoneal dialysis and hemodialysis, and additional dialysis therapies and services. The company has announced its full support of the Administration’s Advancing American Kidney Health Initiative. The company’s expected earnings growth rate for the current year is 8.9%, higher than the Medical - Products industry’s estimated rally of 7%. Incidentally, Baxter carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amgen discovers, develops, manufactures, and delivers human therapeutics worldwide. It offers products for the treatment of oncology/hematology, cardiovascular, inflammation, bone health, and neuroscience. At the same time, it is known for manufacturing drugs like Parsabiv to treat chronic kidney disease. The company’s expected earnings growth rate for the next year is 6%, more than the Medical - Biomedical and Genetics industry’s projected growth of 5.7%.

CVS Health that provides health services and plans in the United States is also looking forward to target growth in home dialysis. The company stated it is already working on its home hemodialysis device. The company, which is part of the Retail - Pharmacies and Drug Stores industry, is projected to notch an earnings growth of 3.8% for the next year.

Shares of Baxter, Amgen and CVS Health gained 0.9%, 0.4% and 1%, respectively, on Jul 10.

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