ResMed Inc. (RMD - Free Report) has been gaining from robust segmental and international growth. The company’s focus on core sleep apnea franchise, digital health technology and international markets is expected to further drive the rally.
Over the past year, shares of the Zacks Rank #2 (Buy) company have outperformed its industry. The stock has gained 57.4% against an 8.4% decline of the industry. Also, the company has outperformed a 2.2% rise of the S&P 500 during the same period.
The renowned designer, manufacturer, and distributor of medical devices and cloud-based software solutions to manage respiratory disorders has a market capitalization of $23.39 billion. The company projects 14.5% growth for the next five years and expects to maintain its strong segmental performance. Further, it delivered a positive earnings surprise of 8.9%, on average, over the trailing four quarters.
Let’s delve deeper.
Impressive Q2 Results: ResMed exited second-quarter 2020 with better-than-expected results. We are upbeat about the company’s growth at constant exchange rate or CER across both its key operating segments. Robust geographic revenue improvement was backed by strong performance of ResMed’s mask and device product portfolios in the United States, Canada and Latin America (excluding Software-as-a-Service or SaaS). Strong device sales in the Europe and Asia markets buoy optimism as well.
Within SaaS, ResMed continues to record positive momentum from its Brightree service portfolio along with an additional contribution from the MatrixCare buyout.
Potential in Digital Health: We are optimistic about ResMed’s focus on digital health technology. Brightree and MatrixCare software systems are significantly contributing to the company’s capabilities of managing more people outside the hospital setting. Given that digital health technology is an integrator across everything that the company does; AirView, myAir, Propeller and a portfolio of other digital health solutions support its plans of reaching out to more customers and partners.
Emphasis on Product Development: We are optimistic about ResMed’s focus on product development and innovation to maintain a leadership position in the sleep-disordered breathing (SDB) market and to expand its sales base. The company recently expanded its AirFit mask portfolio by introducing AirFit N30, the world’s first tube-down nasal cradle CPAP mask with a front-facing tube, in the United States.
However, despite the upsides, the company witnessed dull device sales in France in the second quarter of fiscal 2020. This resulted from customers completing their connected device upgrade programs. The company expects the impact of the same to persist over the next few quarters.
Another concern for ResMed is the stiff competition that it faces from biggies like Fisher & Paykel Healthcare Corporation Limited as well as regional manufacturers. Pricing pressure in the United States and Europe, and problems faced by the company on the reimbursement front are other headwinds.
ResMed is witnessing a positive estimate revision trend for 2020. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 4.4% north to $4.29.
The Zacks Consensus Estimate for the company’s third-quarter fiscal 2020 revenues is pegged at $721 million, suggesting an 8.9% rise from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks from the broader medical space are Phibro Animal Health Corporation (PAHC - Free Report) , Medtronic plc (MDT - Free Report) and Hill-Rom Holdings, Inc. (HRC - Free Report) .
Phibro has a projected long-term earnings growth rate of 2.1%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Medtronic’s long-term earnings growth rate is estimated at 7.4%. The company presently carries a Zacks Rank #2.
Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. It currently carries a Zacks Rank #2.
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