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Why Is ResMed (RMD) Down 3.8% Since the Last Earnings Report?
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It has been about a month since the last earnings report for ResMed Inc. (RMD - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
ResMed Beats Q3 Earnings, Misses Sales Estimates
ResMed announced third-quarter fiscal 2017 adjusted earnings per share (EPS) of $0.71, up 2.8% from the prior-year quarter level. Earnings also beat the Zacks Consensus Estimate by $0.01.
Including one-time items, ResMed reported EPS of $0.62 in the quarter, down 3.1% year over year.
Revenues in Details
Revenues in the reported quarter increased 13.3% year over year (up 14% at constant exchange rate or CER) to $514.2 million. The figure however missed the Zacks Consensus Estimate of $519.6 million.
On a geographic basis, revenues in the Americas rose 18% year over year to $332.1 million, which included Brightree revenues of $35.0 million. Excluding Brightree, revenues in the Americas totaled $297.1 million, reflecting a 5% increase over the prior year quarter. Revenues in combined EMEA and APAC were $182.1 million, highlighting a 9% rise at CER, compared to the same period last year.
Adjusted gross margin expanded 103 basis points (bps) year over year to 58.3% in the reported quarter. Selling, general and administrative expenses were up 15.5% year over year to $137.8 million, while there was a 24.9% increase in Research and Development expenses to $35.1 million. This led to a 17.3% rise in adjusted operating expenses, which amounted to $172.9 million. Accordingly, adjusted operating margin in the quarter contracted 13 bps to 24.6%.
Financial Update
ResMed exited third-quarter 2017 with cash and cash equivalents of $827.3 million, compared with $788.1 million in the second quarter.
Year to date, the company generated $273.7 million of cash flow from operations, down from the year-ago figure of $404.9 million, displaying weak underlying earnings and a decline in net working capital balances.
Concurrent to its third-quarter earnings release, ResMed announced a quarterly dividend of $0.33 per share, representing a 10% increase from the company’s prior payout. The dividend will be paid on Jun 15, to shareholders of record as on May 11.
As previously declared, ResMed temporarily suspended its share repurchase program due to recent acquisitions. However, the company still expects to recommence the buy-back program sometime in fiscal 2018.
Guidance
Management expects SG&A expenses, as a percentage of revenues, in the band of 26%–27%. R&D expenses, as a percentage of revenues, are projected at 7% for fourth-quarter 2017. This reflects marketing expenses associated with product launches along with the ongoing legal expenses.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, ResMed's stock has a subpar score of 'D' on both growth and momentum front. The stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value investors based on our styles scores.
Outlook
While estimates have been moving downward, the magnitude of the revision is net zero. It's no surprise that the stock has a Zacks Rank #4 (Sell). We expect below average returns from the stock in the next few months.
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Why Is ResMed (RMD) Down 3.8% Since the Last Earnings Report?
It has been about a month since the last earnings report for ResMed Inc. (RMD - Free Report) . Shares have lost about 3.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
ResMed Beats Q3 Earnings, Misses Sales Estimates
ResMed announced third-quarter fiscal 2017 adjusted earnings per share (EPS) of $0.71, up 2.8% from the prior-year quarter level. Earnings also beat the Zacks Consensus Estimate by $0.01.
Including one-time items, ResMed reported EPS of $0.62 in the quarter, down 3.1% year over year.
Revenues in Details
Revenues in the reported quarter increased 13.3% year over year (up 14% at constant exchange rate or CER) to $514.2 million. The figure however missed the Zacks Consensus Estimate of $519.6 million.
On a geographic basis, revenues in the Americas rose 18% year over year to $332.1 million, which included Brightree revenues of $35.0 million. Excluding Brightree, revenues in the Americas totaled $297.1 million, reflecting a 5% increase over the prior year quarter. Revenues in combined EMEA and APAC were $182.1 million, highlighting a 9% rise at CER, compared to the same period last year.
Adjusted gross margin expanded 103 basis points (bps) year over year to 58.3% in the reported quarter. Selling, general and administrative expenses were up 15.5% year over year to $137.8 million, while there was a 24.9% increase in Research and Development expenses to $35.1 million. This led to a 17.3% rise in adjusted operating expenses, which amounted to $172.9 million. Accordingly, adjusted operating margin in the quarter contracted 13 bps to 24.6%.
Financial Update
ResMed exited third-quarter 2017 with cash and cash equivalents of $827.3 million, compared with $788.1 million in the second quarter.
Year to date, the company generated $273.7 million of cash flow from operations, down from the year-ago figure of $404.9 million, displaying weak underlying earnings and a decline in net working capital balances.
Concurrent to its third-quarter earnings release, ResMed announced a quarterly dividend of $0.33 per share, representing a 10% increase from the company’s prior payout. The dividend will be paid on Jun 15, to shareholders of record as on May 11.
As previously declared, ResMed temporarily suspended its share repurchase program due to recent acquisitions. However, the company still expects to recommence the buy-back program sometime in fiscal 2018.
Guidance
Management expects SG&A expenses, as a percentage of revenues, in the band of 26%–27%. R&D expenses, as a percentage of revenues, are projected at 7% for fourth-quarter 2017. This reflects marketing expenses associated with product launches along with the ongoing legal expenses.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
ResMed Inc. Price and Consensus
ResMed Inc. Price and Consensus | ResMed Inc. Quote
VGM Scores
At this time, ResMed's stock has a subpar score of 'D' on both growth and momentum front. The stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value investors based on our styles scores.
Outlook
While estimates have been moving downward, the magnitude of the revision is net zero. It's no surprise that the stock has a Zacks Rank #4 (Sell). We expect below average returns from the stock in the next few months.