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ResMed (RMD) Up 6.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for ResMed (RMD - Free Report) . Shares have added about 6.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ResMed due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

ResMed's Q4 Earnings Beat Estimates

ResMed announced fourth-quarter fiscal 2019 adjusted earnings per share (EPS) of 95 cents, flat with the year-ago number. The metric, however, beat the Zacks Consensus Estimate by 3.3%.

Reported EPS was 48 cents for the quarter under review, reflecting a steep drop from 76 cents a year ago.

For fiscal 2019, adjusted EPS came in at $3.64, up 3.1% from the year-ago period. The figure beat the Zacks Consensus Estimate by 0.8%.

Revenues in the reported quarter increased 13% year over year (up 15% at constant exchange rate or CER) to $704.9 million. The figure surpassed the Zacks Consensus Estimate by 0.5%.

For fiscal 2019, revenues totaled $2.61 billion, up 11% from the year-ago period (up 13% at constant exchange rate or CER). The top line was marginally in line with the Zacks Consensus Estimate.

A Closer View of the Top Line

Geographically, excluding Software as a Service, revenues in the United States, Canada and Latin America improved 11% over the prior-year period to $385.5 million.

Global revenues from Software as a Service in the quarter under consideration summed $85.2 million, representing a 111% jump year over year. Revenues in the combined EMEA and APAC region were $234.3 million, highlighting a 4% rise at CER from the year-earlier tally.

Margins

Gross margin for the fiscal fourth quarter was 59.3%, translating to a 115-basis point (bps) expansion from the year-ago number.

Selling, general and administrative expenses were up 9.4% year over year to $171.6 million while Research and development expenses increased 28.9% to $51.1 million. This, in turn, induced a 13.4% rise in adjusted operating expenses, which amounted to $222.7 million. However, adjusted operating margin in the reported quarter expanded 106 bps to 27.7%.

Financial Updates

ResMed exited fiscal 2019 with cash and cash equivalents of $147.1 million compared with $188.7 million at the end of year-ago period.      

For the full year, the company generated $459.1 million of cash flow from operations compared with the year-ago figure of $505 million.

Along with the earnings release, ResMed announced its regular quarterly dividend payout of 39 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, ResMed has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, ResMed has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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