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Here's Why Investors Should Retain ResMed (RMD) Stock for Now
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ResMed Inc. (RMD - Free Report) is well-poised for growth in the coming quarters, backed by the global supply of its cloud-connected platforms, AirSense10 and AirSense11. The strong uptake of the myAir app with AirSense11 is likely to drive higher adherence to therapy in patients. However, the company has been witnessing increased operating expenses in the past few quarters.
Over the past three months, this Zacks Rank #3 (Hold) stock has gained 19.9% compared with 21.9% rise of the industry and a 10.3% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $25.04 billion. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in another. It has an average earnings surprise of 1.80%.
Let’s delve deeper.
Upsides
Recovery in Device Sales: ResMed’s increased device sales continue to drive overall revenue growth, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices to support strong underlying global demand.
In the fiscal first quarter, device sales device sales increased by 8%. In the United States, Canada and Latin America, device sales increased by 2%, which reflects the fact that the company is cycling a particularly higher prior-year comparable that was driven by sales of its card to cloud devices.
Potential in Digital Health: ResMed is progressing across several digital health technology initiatives to increase the value proposition for its connected healthcare ecosystem. The company’s two key global customer-facing software products — AirView and myAir — are 100% in the cloud.
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In the coming quarters, the company is introducing several artificial intelligence-driven coaching features in the AirView system and on the myAir app. These AI-driven data products will provide personalized suggestions to increase patient therapy adherence and ultimately improve patient outcomes. The company is pleased to see that the early testing feedback in customer groups has been positive.
Increased Focus on International Markets: Across Europe, Asia and other markets, device organic sales have been benefiting from the strong demand and continued availability of AS10 and AS11 cloud-connected devices. In the first quarter of fiscal 2024, Masks and other sales increased 23%, reflecting growth in resupply and new patient setups. In Europe, Asia and other markets, device sales increased by 20% at constant currency, reflecting strong demand and significantly improved availability of cloud-connected devices.
Downsides
Escalating Debt Level: The company’s high debt level is a concern. As of Sep 30, 2023, long-term debt was $1.36 billion, while the cash and cash equivalents balance was only $209.1 million. A higher debt level induces higher interest payments, which comes along with the risk of failure to pay the same. At the end of first-quarter fiscal 2024, the company has a times-interest-earned ratio of 21.1%, sequentially lower than fourth-quarter fiscal 2023 ratio of 24.3%.
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.
Estimate Trend
The Zacks Consensus Estimate for RMD’s fiscal 2024 earnings per share (EPS) has moved down from $7.02 to $7.35 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $4.67 billion, up 10.6% from the year-ago reported figure.
Haemonetics’ earnings estimates have remained constant at $3.89 in 2023 and at $4.15 in 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted an earnings surprise of 5.3%.
Estimates for DaVita’s 2023 EPS have remained constant at $8.07 in the past 30 days.
DVA’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.
Estimates for HealthEquity’s 2023 EPS have increased from $2.03 to $2.15 in the past 30 days.
HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.5%. In the last reported quarter, it delivered an average earnings surprise of 22.5%.
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Here's Why Investors Should Retain ResMed (RMD) Stock for Now
ResMed Inc. (RMD - Free Report) is well-poised for growth in the coming quarters, backed by the global supply of its cloud-connected platforms, AirSense10 and AirSense11. The strong uptake of the myAir app with AirSense11 is likely to drive higher adherence to therapy in patients. However, the company has been witnessing increased operating expenses in the past few quarters.
Over the past three months, this Zacks Rank #3 (Hold) stock has gained 19.9% compared with 21.9% rise of the industry and a 10.3% rise of the S&P 500 composite.
The renowned medical device company has a market capitalization of $25.04 billion. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in another. It has an average earnings surprise of 1.80%.
Let’s delve deeper.
Upsides
Recovery in Device Sales: ResMed’s increased device sales continue to drive overall revenue growth, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices to support strong underlying global demand.
In the fiscal first quarter, device sales device sales increased by 8%. In the United States, Canada and Latin America, device sales increased by 2%, which reflects the fact that the company is cycling a particularly higher prior-year comparable that was driven by sales of its card to cloud devices.
Potential in Digital Health: ResMed is progressing across several digital health technology initiatives to increase the value proposition for its connected healthcare ecosystem. The company’s two key global customer-facing software products — AirView and myAir — are 100% in the cloud.
In the coming quarters, the company is introducing several artificial intelligence-driven coaching features in the AirView system and on the myAir app. These AI-driven data products will provide personalized suggestions to increase patient therapy adherence and ultimately improve patient outcomes. The company is pleased to see that the early testing feedback in customer groups has been positive.
Increased Focus on International Markets: Across Europe, Asia and other markets, device organic sales have been benefiting from the strong demand and continued availability of AS10 and AS11 cloud-connected devices. In the first quarter of fiscal 2024, Masks and other sales increased 23%, reflecting growth in resupply and new patient setups. In Europe, Asia and other markets, device sales increased by 20% at constant currency, reflecting strong demand and significantly improved availability of cloud-connected devices.
Downsides
Escalating Debt Level: The company’s high debt level is a concern. As of Sep 30, 2023, long-term debt was $1.36 billion, while the cash and cash equivalents balance was only $209.1 million. A higher debt level induces higher interest payments, which comes along with the risk of failure to pay the same. At the end of first-quarter fiscal 2024, the company has a times-interest-earned ratio of 21.1%, sequentially lower than fourth-quarter fiscal 2023 ratio of 24.3%.
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.
Estimate Trend
The Zacks Consensus Estimate for RMD’s fiscal 2024 earnings per share (EPS) has moved down from $7.02 to $7.35 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $4.67 billion, up 10.6% from the year-ago reported figure.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics (HAE - Free Report) , DaVita (DVA - Free Report) and HealthEquity (HQY - Free Report) . Haemonetics and HealthEquity carry a Zacks Rank #2 (Buy), and DaVita sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ earnings estimates have remained constant at $3.89 in 2023 and at $4.15 in 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted an earnings surprise of 5.3%.
Estimates for DaVita’s 2023 EPS have remained constant at $8.07 in the past 30 days.
DVA’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.
Estimates for HealthEquity’s 2023 EPS have increased from $2.03 to $2.15 in the past 30 days.
HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.5%. In the last reported quarter, it delivered an average earnings surprise of 22.5%.