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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. Solid, sustained growth in the SaaS business raises optimism. However, the escalating debt levels and competitive landscape raise concerns.
In the past three months, this Zacks Rank #3 (Hold) stock has gained 18.6% compared with a 9.8% rise of the industry and a 10.2% increase 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 1.83%.
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. The adoption rates of the myAir app by new patients set up on therapy with the AirSense 11 continue to be more than double that of AirSense 10. The patient utilization of a digital health platform like myAir is directly linked to higher adherence to therapy, which is directly related to better patient outcomes and increased resupply, which ultimately drives better outcomes for the payer and the provider.
Potential in Digital Health: ResMed is progressing across several digital health technology initiatives further to increase the value proposition for its connected healthcare ecosystem.
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In terms of the latest development, ResMed is leading the market in digital health technology, with more than 17 billion nights of medical data in the cloud and nearly 23.5 million cloud-connectable medical devices on people's bedside tables in 140 countries worldwide. The company is liberating this data to the cloud, unlocking value for patients, providers, physicians, payers and entire healthcare systems.
Strategic Pacts to Boost SaaS Business: The company tends to opt for strategic buyouts to boost SaaS revenues. The most recent addition to the portfolio, MEDIFOX DAN, continues to surpass the company’s initial expectations with an accelerated contribution. Investing in the leading German healthcare system is synonymous with ResMed’s vision of lower cost, lower acuity and highest-quality outcome care for patients. Per the latest update at the end of fiscal Q2, ResMed’s SaaS business is currently reflecting strong contributions from MEDIFOX DAN in Germany and growth across Brightree and MatrixCare brands in the U.S. market.
Downsides
Escalating Debt Level: The company’s high debt level is a concern. As of Dec 31, 2023, long-term debt was $1.26 billion, while the cash and cash equivalents balance was only $210.2 million. A higher debt level induces higher interest payments, which comes with the risk of failure to pay the same. At the end of the second quarter of fiscal 2024, the company has a times-interest-earned ratio of 19.7%, sequentially lower than first-quarter fiscal 2024 ratio of 21.7%.
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 $7.35 to $7.39 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $4.65 billion, suggesting an increase of 10.0% from the year-ago reported figure.
Key Picks
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Cencora, Inc. (COR - Free Report) and Cardinal Health (CAH - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported an adjusted EPS of $3.46 in fourth-quarter 2023, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, beating the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion increased 11.6% on a year-over-year basis and topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.
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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. Solid, sustained growth in the SaaS business raises optimism. However, the escalating debt levels and competitive landscape raise concerns.
In the past three months, this Zacks Rank #3 (Hold) stock has gained 18.6% compared with a 9.8% rise of the industry and a 10.2% increase 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 1.83%.
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. The adoption rates of the myAir app by new patients set up on therapy with the AirSense 11 continue to be more than double that of AirSense 10. The patient utilization of a digital health platform like myAir is directly linked to higher adherence to therapy, which is directly related to better patient outcomes and increased resupply, which ultimately drives better outcomes for the payer and the provider.
Potential in Digital Health: ResMed is progressing across several digital health technology initiatives further to increase the value proposition for its connected healthcare ecosystem.
In terms of the latest development, ResMed is leading the market in digital health technology, with more than 17 billion nights of medical data in the cloud and nearly 23.5 million cloud-connectable medical devices on people's bedside tables in 140 countries worldwide. The company is liberating this data to the cloud, unlocking value for patients, providers, physicians, payers and entire healthcare systems.
Strategic Pacts to Boost SaaS Business: The company tends to opt for strategic buyouts to boost SaaS revenues. The most recent addition to the portfolio, MEDIFOX DAN, continues to surpass the company’s initial expectations with an accelerated contribution. Investing in the leading German healthcare system is synonymous with ResMed’s vision of lower cost, lower acuity and highest-quality outcome care for patients. Per the latest update at the end of fiscal Q2, ResMed’s SaaS business is currently reflecting strong contributions from MEDIFOX DAN in Germany and growth across Brightree and MatrixCare brands in the U.S. market.
Downsides
Escalating Debt Level: The company’s high debt level is a concern. As of Dec 31, 2023, long-term debt was $1.26 billion, while the cash and cash equivalents balance was only $210.2 million. A higher debt level induces higher interest payments, which comes with the risk of failure to pay the same. At the end of the second quarter of fiscal 2024, the company has a times-interest-earned ratio of 19.7%, sequentially lower than first-quarter fiscal 2024 ratio of 21.7%.
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 $7.35 to $7.39 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $4.65 billion, suggesting an increase of 10.0% from the year-ago reported figure.
Key Picks
Some better-ranked stocks from the broader medical space are Stryker Corporation (SYK - Free Report) , Cencora, Inc. (COR - Free Report) and Cardinal Health (CAH - Free Report) .
Stryker, carrying a Zacks Rank #2 (Buy), reported an adjusted EPS of $3.46 in fourth-quarter 2023, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, beating the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion increased 11.6% on a year-over-year basis and topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%.