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Impressive 1Q for ResMed

RMD CFN

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ResMed Inc. (RMD - Analyst Report) reported earnings per share (‘EPS’) of 49 cents in the first quarter of fiscal 2013, comfortably beating the Zacks Consensus Estimate of 46 cents. The results were also better than the year-ago EPS by 48%. Apart from increased sales and higher margin, a 5.2% fall in shares outstanding contributed to the EPS improvement.

Revenues increased 8% year over year (up 12% at constant exchange rates or CER) to $339.7 million, almost in line with the Zacks Consensus Estimate. Based on a favorable product mix and vastly under-penetrated and growing sleep-disorder breathing market, revenues in the Americas increased 15% to $194.4 million but remained flat (up 9% at CER) outside the Americas at $145.4 million. Strong year-over-year growth in flow generator and mask categories contributed to the overall growth.  

The company reported domestic flow generator sales of $84.8 million in the quarter, up 17% year over year due to strong growth in Automatic Positive Airway Pressure (“APAP”) systems. Masks and other sales were $109.6 million, up 13% year over year, driven by strong contributions across the mask product range and continued growth in accessories. Outside the Americas, Flow Generator sales were $96.7 million, down 2% year over year but up 7% at CER. Outside Americas Masks and other sales were $48.6 million, up 4% (up 13% at CER) year over year. At CER, worldwide Flow Generator sales increased 11% year over year, while masks and other increased 13%.

Gross profit climbed up 12.7% to $208.6 million leading to a 260 basis points (bps) expansion in gross margin to 61.4%. Selling, general and administrative, and research and development expenses during the quarter were up 4% (up 9% at CER) to $98.3 million and up 4% (up 6%) to $27.2 million, respectively, favorably impacted by an appreciating US dollar. Nevertheless, operating margin increased 390 bps to 24.5% during the quarter.

ResMed exited the quarter with cash and cash equivalents of $890.6 million compared with $809.5 million at the end of fiscal 2012. Cash flow generated from operations was $78.3 million during the first quarter.

ResMed repurchased 216,000 shares for $8.1 million during the quarter (13.6 million shares for $391.2 million in fiscal 2012) and was left with the authorization to repurchase 8.6 million shares. In fiscal 2013, ResMed intends to purchase at least 2 million shares through its existing share buyback program. Additionally, the Board of Directors declared a quarterly dividend of 17 cents per share, payable on December 18, 2012.

Despite the challenging macroeconomic scenario in Europe, we are encouraged by ResMed’s overall improved top and bottom-line performances during the first quarter of fiscal 2013. Presently, ResMed is emphasizing building strategic relationships in order to penetrate further in the domestic and international arena that includes the 5-year exclusive distribution agreement with CareFusion (CFN - Analyst Report).

Currently, ResMed retains a short-term Zacks #3 (Hold Rank).

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