Back to top

Image: Bigstock

ResMed (RMD) Grows on Stellar Mask Sales, SaaS Capabilities

Read MoreHide Full Article

On Apr 13, we issued an updated research report on ResMed Inc. (RMD - Free Report) . The stock carries a Zacks Rank #2 (Buy), at present.

Over the past three months, shares of ResMed have outperformed its industry. The stock has gained 0.9%, as against the 10.8% decline of the industry.

Overall, the company registered double-digit global revenue growth in the last reported quarter. We are particularly upbeat about solid constant-currency growth in both its key operating segments — Total Sleep and Respiratory Care and Software-as-a-Service (SaaS) — during this period.

Mask and other sales were up 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 impressive in the United States, Canada and the 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 grew in double digits during the quarter. ResMed’s focus on digital health technology boosts investors’ optimism.

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

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 the company’s plans to serve more customers and partners.

ResMed is currently investing in advanced analytics and expanding its skills in machine learning and machine intelligence, such 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 are prevalent concerns. The company is also constantly exposed to unfavorable foreign-exchange fluctuations. Additionally, rising operating expense is another major headwind.

Other Key Picks

Some other top-ranked stocks from the broader medical space include McKesson Corporation (MCK - Free Report) , Merit Medical Systems, Inc. (MMSI - Free Report) and Masimo Corporation (MASI - Free Report) , each currently carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

McKesson has an estimated long-term earnings growth rate of 6.1%.

Merit Medical has an expected long-term earnings growth rate of 12.1%.

Masimo has a projected long-term earnings growth rate of 23.3%.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>