ResMed (RMD) is a global company with a market capitalisation of $18 Billion AUD. RMD is involved in the development, manufacturing and marketing of medical products for the treatment and management of respiratory disorders, with a focus on sleep-disordered breathing. RMD sells a range of products in approximately 100 countries worldwide.
Sleep-disordered breathing includes obstructive sleep apnea (OSA) and other respiratory disorders that occur during sleep. RMD has developed the treatment, “nasal Continuous Positive Airway Pressure (CPAP)”, as non-invasive treatment for obstructive sleep apnea.
On April 26 ResMed reported third quarter results after the United States market close. RMD reported higher earnings, on better than expected sales. Here are some of the key highlights:-
- Net profit after tax (NPAT) of US$132.5 million (+32pc year on year) above Morgans estimates of US $118million and consensus expectation of US $115 million.
- On an earnings per share (EPS) basis reporting US$0.92 (+30pc year on year growth and above Morgans estimates of US $0.83/share).
- On the revenue line RMD came in at US$591.6m (+15pc year on year) was above expectations.
ResMed Inc third quarter - Better International reimbursement & operating leverage:
- Earnings were above expectations , underpinned by strong international product sales on changing tele-monitoring reimbursement, operating leverage and continued strength in the company’s leading connected-care offerings.
- Gross Margin (GM) was consistent with second quarter and in-line with guidance, with manufacturing and procurement gains helping to offset unfavorable foreign exchange and product mix.
- Operating leverage continues to improve, which we view as sustainable on the back of stable pricing, further traction in tele-monitoring, a “full” mask pipeline and numerous other product development initiatives.
We characterise the third quarter result from ResMed as solid, with international sales and improving operating leverage the standouts.
Given the positive quarterly update we have maintained our Add rating. However ResMed does track on a forward price earnings multiple of 25.3x earnings which is a premium to the broader market and the healthcare sector.
Risks to our positive view include greater pricing pressures on RMD devices than expected, market share loss, increased competition and growing foreign exchange headwinds.
- Financial Adviser (Authorised Representative: 000341081) Morgans Financial Limited | ABN 49 010 669 726 | AFSL 235410