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ResMed (RMD) Grows on SaaS Capabilities Amid Rising Expenses

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On Mar 11, 2020, we issued an updated research report on ResMed Inc. (RMD - Free Report) . The stock carries a Zacks Rank #2 (Buy).

In the past three months, shares of ResMed have outperformed its industry. The stock has gained 2.6% against the 15.3% decline of the industry.

ResMed exited second-quarter fiscal 2020 on a solid note with better-than-expected results. Overall, the company achieved double-digit global revenue growth in the reported quarter. We are also upbeat about strong constant-currency growth in both its key operating segments, namely Total Sleep and Respiratory Care, and Software-as-a-Service (SaaS) during the quarter.

Mask and other sales grew 5% in combined Europe, Asia and other markets at CER, reflecting a strong adoption of AirFit F20 and AirFit N20. Geographically, excluding SaaS, revenue growth was strong in the United States, Canada and Latin America regions.

 

Within SaaS, the company recorded continued momentum in the Brightree service portfolio and an additional contribution from the MatrixCare buyout. Global revenues from SaaS in the quarter under review grew in double digits. ResMed’s focus on digital health technology instils investors’ optimism.

Of late, ResMed has been focusing on digital health technology. The Brightree and MatrixCare software systems are significantly adding to the company’s capabilities of managing 90 million more people outside the hospital setting.

Given that digital health technology is being implemented across all product lines of the company, its AirView, myAir, Propeller and a portfolio of other digital health solutions support its plans to serve more customers and partners.

ResMed is currently investing in advanced analytics and expanding its skills in machine learning and machine intelligence so that the digital health ecosystem can attain high volume-based growth rates.

However, in the fiscal second quarter, device sales in France declined as customers completed their connected device upgrade programs. Further, challenges like competitive bidding and reimbursement issues persistently plague the stock. The company is also constantly exposed to unfavorable foreign exchange fluctuations. Additionally, its rising operating expenses are a major headwind.

Other Key Picks

Some other top-ranked stocks from the broader medical space are ICU Medical, Inc. (ICUI - Free Report) , Medtronic plc (MDT - Free Report) and Hill-Rom Holdings, Inc. .

ICU Medical has a long-term historical earnings growth rate of 24.2%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) 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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