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Reasons Why You Should Retain ResMed (RMD) Stock For Now
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ResMed Inc. (RMD - Free Report) is gaining from increased demand for its sleep and respiratory care devices. The company posted better-than-expected results for the second quarter of fiscal 2023. The robust sales performance in the Software as a Service (SaaS) segment is impressive. However, mounting operating costs and stiff competition raise apprehensions.
In the past year, the Zacks Rank #3 (Hold) stock has lost 10% compared with a 37.9% fall of the industry and a 9.2% decline of the S&P 500.
The renowned medical device company has a market capitalization of $31.62 billion. Its earnings for the second quarter of fiscal 2023 surpassed the Zacks Consensus Estimate by 3.8%. The company has a long-term expected growth rate of 16.6% compared with the industry’s 13.5% rise.
Let’s delve deeper.
Factors At Play
Q2 Upsides: ResMed exited the second quarter of fiscal 2023 with better-than-expected earnings and revenues. The company recorded a robust sales performance in the quarter on increased demand for sleep and respiratory care devices. Mask sales growth was strong across the globe, reflecting a post-COVID pandemic awareness about the importance and need for respiratory hygiene and respiratory health. The company registered strong customer uptake of the re-engineered AirSense 10 Card-to-Cloud device.
Robust Mask Sales: ResMed continues to see robust demand for a market-leading mask portfolio despite being faced with challenges related to lower new patient setups from a competitor recall. The company recorded increased masks and other sales in the United States, Canada and Latin America region in the fiscal second quarter, where growth was 11% on a reported basis, reflecting solid resupply revenues amid a challenging device-supply environment. Masks and other sales in Europe, Asia and other markets increased by 14% in constant currency terms.
Image Source: Zacks Investment Research
COVID-19-Led Critical Care Drives Demand for Products: ResMed’s business received a significant boost amid the pandemic on the back of strong demand for critical care products like ventilators and masks.
During the fiscal second-quarter update, the company continues to drive growth, banking on the strong adoption of ventilator devices worldwide. The company witnessed good uptake of both the life support and non-life support ventilator platforms during the quarter. There is also ongoing adoption of Propeller's monitoring system. Its digital therapeutic platform is now integrated with the two leading US electronic health record systems Epic and Cerner. This digital health integration makes it easier for doctors and healthcare workers to onboard people to the Propeller platform.
Downsides
Mounting Costs: During the quarter, ResMed’s selling, general and administrative expenses rose 14.2% year over year, predominantly on increases in employee-related expenses, professional service fees and travel expenses. Meanwhile, research and development expenses increased 11.8%. These mounting expenses led to an adjusted operating margin contraction of 36 bps year over year to 29.6%, weighing on the company’s bottom line.
Competitive Landscape: The market for SDB products is highly competitive with respect to product price, features and reliability. ResMed's primary competitors include Philips BV; DeVilbiss Healthcare; Fisher & Paykel Healthcare Corporation Limited; Apex Medical Corporation; BMC Medical Co. Ltd.; and regional manufacturers. The disparity between the company's resources and those of its competitors may increase due to consolidation in the healthcare industry. Moreover, some of ResMed's competitors, such as Löwenstein Medical GmbH + Co. KG, are affiliates of its customers, which may make it difficult for the company to compete with them.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for ResMed’s fiscal 2023 earnings has moved down to $6.38 by 1.5%.
The Zacks Consensus Estimate for its fiscal 2023 revenues is pegged at $4.08 billion, suggesting a 14% rise from the 2022 comparable figure.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 48.7% against the industry’s 0.8% decline in the past year.
Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 28.1% against the industry’s 0.8% decline in the past year.
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Reasons Why You Should Retain ResMed (RMD) Stock For Now
ResMed Inc. (RMD - Free Report) is gaining from increased demand for its sleep and respiratory care devices. The company posted better-than-expected results for the second quarter of fiscal 2023. The robust sales performance in the Software as a Service (SaaS) segment is impressive. However, mounting operating costs and stiff competition raise apprehensions.
In the past year, the Zacks Rank #3 (Hold) stock has lost 10% compared with a 37.9% fall of the industry and a 9.2% decline of the S&P 500.
The renowned medical device company has a market capitalization of $31.62 billion. Its earnings for the second quarter of fiscal 2023 surpassed the Zacks Consensus Estimate by 3.8%. The company has a long-term expected growth rate of 16.6% compared with the industry’s 13.5% rise.
Let’s delve deeper.
Factors At Play
Q2 Upsides: ResMed exited the second quarter of fiscal 2023 with better-than-expected earnings and revenues. The company recorded a robust sales performance in the quarter on increased demand for sleep and respiratory care devices. Mask sales growth was strong across the globe, reflecting a post-COVID pandemic awareness about the importance and need for respiratory hygiene and respiratory health. The company registered strong customer uptake of the re-engineered AirSense 10 Card-to-Cloud device.
Robust Mask Sales: ResMed continues to see robust demand for a market-leading mask portfolio despite being faced with challenges related to lower new patient setups from a competitor recall. The company recorded increased masks and other sales in the United States, Canada and Latin America region in the fiscal second quarter, where growth was 11% on a reported basis, reflecting solid resupply revenues amid a challenging device-supply environment. Masks and other sales in Europe, Asia and other markets increased by 14% in constant currency terms.
COVID-19-Led Critical Care Drives Demand for Products: ResMed’s business received a significant boost amid the pandemic on the back of strong demand for critical care products like ventilators and masks.
During the fiscal second-quarter update, the company continues to drive growth, banking on the strong adoption of ventilator devices worldwide. The company witnessed good uptake of both the life support and non-life support ventilator platforms during the quarter. There is also ongoing adoption of Propeller's monitoring system. Its digital therapeutic platform is now integrated with the two leading US electronic health record systems Epic and Cerner. This digital health integration makes it easier for doctors and healthcare workers to onboard people to the Propeller platform.
Downsides
Mounting Costs: During the quarter, ResMed’s selling, general and administrative expenses rose 14.2% year over year, predominantly on increases in employee-related expenses, professional service fees and travel expenses. Meanwhile, research and development expenses increased 11.8%. These mounting expenses led to an adjusted operating margin contraction of 36 bps year over year to 29.6%, weighing on the company’s bottom line.
Competitive Landscape: The market for SDB products is highly competitive with respect to product price, features and reliability. ResMed's primary competitors include Philips BV; DeVilbiss Healthcare; Fisher & Paykel Healthcare Corporation Limited; Apex Medical Corporation; BMC Medical Co. Ltd.; and regional manufacturers. The disparity between the company's resources and those of its competitors may increase due to consolidation in the healthcare industry. Moreover, some of ResMed's competitors, such as Löwenstein Medical GmbH + Co. KG, are affiliates of its customers, which may make it difficult for the company to compete with them.
Estimate Trend
Over the past 90 days, the Zacks Consensus Estimate for ResMed’s fiscal 2023 earnings has moved down to $6.38 by 1.5%.
The Zacks Consensus Estimate for its fiscal 2023 revenues is pegged at $4.08 billion, suggesting a 14% rise from the 2022 comparable figure.
Key Picks
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. (AMN - Free Report) , Cardinal Health, Inc. (CAH - Free Report) and Merit Medical Systems, Inc. (MMSI - Free Report) .
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.
Cardinal Health has gained 48.7% against the industry’s 0.8% decline in the past year.
Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 28.1% against the industry’s 0.8% decline in the past year.