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ResMed (RMD) Q4 Earnings: Disappointment in the Cards?
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ResMed Inc. (RMD - Free Report) is scheduled to report its fourth-quarter fiscal 2016 earnings on Jul 28, after the closing bell.
Last quarter, the company posted a negative earnings surprise of 1.45%.Though on a brighter note, ResMed’s earnings have outpaced the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 1.92%.
Let’s see how things are shaping up prior to this announcement.
ResMed opened its account in the fourth quarter with the completion of Brightree’s acquisition – a health-information technology group, a deal which was signed in the preceding quarter. Management expects this acquisition to expand ResMed’s Air Solutions platform with a stronger end-to-end value proposition for ResMed’s customers.
Per management’s earlier declaration, financial integration of Brightree within its operations will start immediately after completion of the buyout. Following this, the deal is predicted to be accretive immediately to ResMed’s gross margins and adjusted EPS.
Consequently we believe this accretion to get evident from the yet-to-be released fiscal fourth quarter results, in the form of raised gross margin and bottom line figures. Notably, management estimates that the Brightree acquisition will have a positive impact of 70-100 basis points on ResMed’s gross margin in the fourth quarter.
Furthermore, management believes that initiation of the integration process for its recently acquired Innova Labs, has offered ResMed considerable opportunities to grow its revenue in the fiscal fourth quarter and beyond; by providing portable oxygen concentrators through its global market channels.
In terms of product categories, management remained particularly optimistic about ResMed’s mask and accessories category; wherein a solid growth is expected in the fourth quarter and going ahead.
On the flip side, the failure of the SERVE-HF trial in May 2015 has been a drag to company’s sales from Adaptive Servo-Ventilation (ASV) devices for quite some time. Management expects to witness similar weak ASV growth trend in the fourth quarter too, with the largest impact on the company’s EMEA and APAC region.
Management also remains confident of the company’s strategy to continue to make incremental investments across its research and development (R&D) portfolio, which in turn might raise the R&D expenses for the quarter.
Earnings Whispers
Our proven model does not conclusively show that ResMed is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: ResMed has an earnings ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 74 cents.
Zacks Rank: ResMed has a Zacks Rank #4 (Sell), which along with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Bristol-Myers Squibb Co. (BMY - Free Report) , with an Earnings ESP of +1.49% and a Zacks Rank #1.
GW Pharmaceuticals plc , with an Earnings ESP of +6.36% and a Zacks Rank #2.
Teligent, Inc. (TLGT - Free Report) , with an Earnings ESP of +100% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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ResMed (RMD) Q4 Earnings: Disappointment in the Cards?
ResMed Inc. (RMD - Free Report) is scheduled to report its fourth-quarter fiscal 2016 earnings on Jul 28, after the closing bell.
Last quarter, the company posted a negative earnings surprise of 1.45%.Though on a brighter note, ResMed’s earnings have outpaced the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 1.92%.
Let’s see how things are shaping up prior to this announcement.
RESMED INC Price and EPS Surprise
RESMED INC Price and EPS Surprise | RESMED INC Quote
Factors at Play
ResMed opened its account in the fourth quarter with the completion of Brightree’s acquisition – a health-information technology group, a deal which was signed in the preceding quarter. Management expects this acquisition to expand ResMed’s Air Solutions platform with a stronger end-to-end value proposition for ResMed’s customers.
Per management’s earlier declaration, financial integration of Brightree within its operations will start immediately after completion of the buyout. Following this, the deal is predicted to be accretive immediately to ResMed’s gross margins and adjusted EPS.
Consequently we believe this accretion to get evident from the yet-to-be released fiscal fourth quarter results, in the form of raised gross margin and bottom line figures. Notably, management estimates that the Brightree acquisition will have a positive impact of 70-100 basis points on ResMed’s gross margin in the fourth quarter.
Furthermore, management believes that initiation of the integration process for its recently acquired Innova Labs, has offered ResMed considerable opportunities to grow its revenue in the fiscal fourth quarter and beyond; by providing portable oxygen concentrators through its global market channels.
In terms of product categories, management remained particularly optimistic about ResMed’s mask and accessories category; wherein a solid growth is expected in the fourth quarter and going ahead.
On the flip side, the failure of the SERVE-HF trial in May 2015 has been a drag to company’s sales from Adaptive Servo-Ventilation (ASV) devices for quite some time. Management expects to witness similar weak ASV growth trend in the fourth quarter too, with the largest impact on the company’s EMEA and APAC region.
Management also remains confident of the company’s strategy to continue to make incremental investments across its research and development (R&D) portfolio, which in turn might raise the R&D expenses for the quarter.
Earnings Whispers
Our proven model does not conclusively show that ResMed is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.
Zacks ESP: ResMed has an earnings ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 74 cents.
Zacks Rank: ResMed has a Zacks Rank #4 (Sell), which along with an ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Bristol-Myers Squibb Co. (BMY - Free Report) , with an Earnings ESP of +1.49% and a Zacks Rank #1.
GW Pharmaceuticals plc , with an Earnings ESP of +6.36% and a Zacks Rank #2.
Teligent, Inc. (TLGT - Free Report) , with an Earnings ESP of +100% and a Zacks Rank #2.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>