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ResMed (RMD) Q3 Earnings and Revenues Surpass Estimates
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ResMed Inc.’s (RMD - Free Report) adjusted earnings per share (EPS) in the third quarter of fiscal 2023 were $1.68, up 27.3% year over year. The metric beat the Zacks Consensus Estimate by 7%.
The adjustments include certain non-recurring expenses/benefits like the amortization of acquired intangibles and acquisition-related expenses, among others.
GAAP EPS in the reported quarter was $1.58, up 29.5% from the year-ago quarter’s EPS.
Revenues
Fiscal third-quarter revenues on a reported basis increased 29.2% year over year (up 31% at the constant exchange rate or CER) to $1.12 billion. The figure beat the Zacks Consensus Estimate by 8.7%.
Revenue growth in the quarter was backed by the better availability of the company’s sleep products to meet the underlying demand and solid growth across its broader product portfolio.
However, year-on-year movements in foreign exchange, particularly the weaker Euro, negatively impacted revenues by approximately $20 million in the fiscal third quarter.
Total Sleep and Respiratory Care revenues improved 28.4% (up 31% at CER) from the prior-year period to $980.1 million.
Total Sleep and Respiratory Care revenues in Europe, Asia and other markets rose 21.9% on a reported basis and 28% at CER to $351 million. Global Revenues comprised Total Devices revenues of $607.9 million, up 40.4% (up 43% at CER) and Total Masks and other revenues of $372.2 billion, up 12.7% (up 15% at CER), all on a year-over-year basis.
Meanwhile, Software-as-a-Service (SaaS) revenues grew 35.3% to $136.8 million (up 9% at CER).
Margins
The adjusted gross profit in the quarter under review rose 24.7% to $626.1 million, despite a 35.5% uptick in the cost of sales (excluding the amortization of acquired intangibles).
However, the adjusted gross margin for the fiscal third quarter was 56.1%, reflecting a contraction of 203 basis points (bps). This decrease can be mainly attributed to an unfavorable product mix and a higher component cost, partially offset by an increase in average selling prices.
SG&A expenses rose 25.2% year over year to $228.5 million. Research and development expenses increased 14.4% to $76.4 million.
The adjusted operating income was $321.2 million in the quarter under discussion, up 27% from the year-ago quarter. However, the adjusted operating margin contracted 51 bps year over year to 28.7%.
Financial Updates
ResMed exited the third quarter of fiscal 2023 with cash and cash equivalents of $227.9 million, compared with $273.7 million at the end of the second quarter of fiscal 2023. Total debt (short and long-term) at the end of the fiscal third quarter was $1.59 billion compared with $775.2 million at the end of the fiscal second quarter.
The cumulative net cash provided by operating activities at the end of the fiscal third quarter was $282.6 million compared with $117.4 million in the year-ago period.
The company paid out $64.6 million in dividends in the fiscal third quarter.
Our Take
ResMed exited the third 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. RMD’s acquisition of MEDIFOX DAN positively contributed to the reported quarter’s SaaS business revenues, registering continued organic growth.
The organic growth of ResMed’s mask and accessory business is supported by the new patient flow and new patient growth and enhanced resupply programs to existing patients, fuelled by continuous core patient demand.
Meanwhile, RMD continues expanding the base of its AirSense 11 platform worldwide by ramping up its production and availability. Despite persistent supply-chain constraints, ResMed established a foothold in its largest market for its connected sleep apnea therapy devices CPAP and APAP through the combination of AirSense 10 and AirSense 11.
Meanwhile, escalating costs pressurizing the company’s operating margin are worrisome. A year-over-year increase in the fiscal third quarter’s SG&A expenses was driven by a rise in employee-related expenses and travel expenditures.
Zacks Rank & Other Key Picks
ResMed currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation (EW - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Edwards Lifesciences, carrying a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.
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ResMed (RMD) Q3 Earnings and Revenues Surpass Estimates
ResMed Inc.’s (RMD - Free Report) adjusted earnings per share (EPS) in the third quarter of fiscal 2023 were $1.68, up 27.3% year over year. The metric beat the Zacks Consensus Estimate by 7%.
The adjustments include certain non-recurring expenses/benefits like the amortization of acquired intangibles and acquisition-related expenses, among others.
GAAP EPS in the reported quarter was $1.58, up 29.5% from the year-ago quarter’s EPS.
Revenues
Fiscal third-quarter revenues on a reported basis increased 29.2% year over year (up 31% at the constant exchange rate or CER) to $1.12 billion. The figure beat the Zacks Consensus Estimate by 8.7%.
Revenue growth in the quarter was backed by the better availability of the company’s sleep products to meet the underlying demand and solid growth across its broader product portfolio.
However, year-on-year movements in foreign exchange, particularly the weaker Euro, negatively impacted revenues by approximately $20 million in the fiscal third quarter.
ResMed Inc. Price, Consensus and EPS Surprise
ResMed Inc. price-consensus-eps-surprise-chart | ResMed Inc. Quote
A Closer View of the Q3 Top Line
Total Sleep and Respiratory Care revenues improved 28.4% (up 31% at CER) from the prior-year period to $980.1 million.
Total Sleep and Respiratory Care revenues in Europe, Asia and other markets rose 21.9% on a reported basis and 28% at CER to $351 million. Global Revenues comprised Total Devices revenues of $607.9 million, up 40.4% (up 43% at CER) and Total Masks and other revenues of $372.2 billion, up 12.7% (up 15% at CER), all on a year-over-year basis.
Meanwhile, Software-as-a-Service (SaaS) revenues grew 35.3% to $136.8 million (up 9% at CER).
Margins
The adjusted gross profit in the quarter under review rose 24.7% to $626.1 million, despite a 35.5% uptick in the cost of sales (excluding the amortization of acquired intangibles).
However, the adjusted gross margin for the fiscal third quarter was 56.1%, reflecting a contraction of 203 basis points (bps). This decrease can be mainly attributed to an unfavorable product mix and a higher component cost, partially offset by an increase in average selling prices.
SG&A expenses rose 25.2% year over year to $228.5 million. Research and development expenses increased 14.4% to $76.4 million.
The adjusted operating income was $321.2 million in the quarter under discussion, up 27% from the year-ago quarter. However, the adjusted operating margin contracted 51 bps year over year to 28.7%.
Financial Updates
ResMed exited the third quarter of fiscal 2023 with cash and cash equivalents of $227.9 million, compared with $273.7 million at the end of the second quarter of fiscal 2023. Total debt (short and long-term) at the end of the fiscal third quarter was $1.59 billion compared with $775.2 million at the end of the fiscal second quarter.
The cumulative net cash provided by operating activities at the end of the fiscal third quarter was $282.6 million compared with $117.4 million in the year-ago period.
The company paid out $64.6 million in dividends in the fiscal third quarter.
Our Take
ResMed exited the third 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. RMD’s acquisition of MEDIFOX DAN positively contributed to the reported quarter’s SaaS business revenues, registering continued organic growth.
The organic growth of ResMed’s mask and accessory business is supported by the new patient flow and new patient growth and enhanced resupply programs to existing patients, fuelled by continuous core patient demand.
Meanwhile, RMD continues expanding the base of its AirSense 11 platform worldwide by ramping up its production and availability. Despite persistent supply-chain constraints, ResMed established a foothold in its largest market for its connected sleep apnea therapy devices CPAP and APAP through the combination of AirSense 10 and AirSense 11.
Meanwhile, escalating costs pressurizing the company’s operating margin are worrisome. A year-over-year increase in the fiscal third quarter’s SG&A expenses was driven by a rise in employee-related expenses and travel expenditures.
Zacks Rank & Other Key Picks
ResMed currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Edwards Lifesciences Corporation (EW - Free Report) , Intuitive Surgical, Inc. (ISRG - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Edwards Lifesciences, carrying a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of 62 cents, beating the Zacks Consensus Estimate by 1.6%. Revenues of $1.46 billion outpaced the consensus mark by 4.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Edwards Lifesciences has a long-term estimated growth rate of 6.8%. EW’s earnings surpassed estimates in two of the trailing four quarters, missed the same in one and broke even in the other, the average being 1.2%.
Intuitive Surgical, having a Zacks Rank #2, reported a first-quarter 2023 adjusted EPS of $1.23, which beat the Zacks Consensus Estimate by 3.4%. Revenues of $1.70 billion outpaced the consensus mark by 6.9%.
Intuitive Surgical has a long-term estimated growth rate of 13%. ISRG’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average being 1.9%.
Johnson & Johnson reported first-quarter 2023 adjusted earnings of $2.68 per share, beating the Zacks Consensus Estimate by 6.8%. Revenues of $24.75 billion surpassed the Zacks Consensus Estimate by 5%. It currently carries a Zacks Rank #2.
Johnson & Johnson has a long-term estimated growth rate of 5.5%. JNJ’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 3.9%.