On Mar 10, 2014, we initiated coverage on
). ResMed delivered a weak second-quarter fiscal 2014 with both
the top and the bottom line lagging the respective Zacks
Consensus Estimate. However, the still-untapped obstructive sleep
apnea (OSA) market should catalyze growth in the near term.
In the quarter under review, the company's adjusted earnings
per share of 60 cents missed the Zacks Consensus Estimate by 3
cents. Results, however, surpassed the prior-year quarter's
earnings of 53 cents per share, registering an increase of 13.2%
year over year. Revenues also grew 2.1% year over year to $384.3
million but remained well below the Zacks Consensus Estimate of
The CMS decision on competitive bidding was a major letdown
for the company. In the last reported quarter, net revenue in
North and Latin America declined 2% primarily due to increased
competitor activity and market restructuring on account of
competitive bidding. Moreover, the ongoing headwind related to
reimbursement issues across the world along with the recent
healthcare reform in the U.S. is taking a toll on the company's
However, ResMed continues to gain from a solid foothold in the
huge sleep-disordered breathing (SDB) market. According to the
company, several initiatives are now being taken to increase
awareness regarding OSA. This has led to improved understanding
of the role of SDB treatment in the management of cardiac,
neurologic, metabolic and related disorders, and has driven an
increase in home-based diagnosis, which in turn, promises a
growing SDB market for the company in the near future.
Continuous solid overseas growth amid several macroeconomic
uncertainties is also encouraging. Robust pipeline development
also bolsters confidence. Meanwhile, ResMed has been rewarding
its shareholders with attractive share repurchases and
The stock currently carries a Zacks Rank #2 (Buy).
Key Picks from the Sector
Other stocks like
) are also expected to do well. All the three stocks hold the
same Zacks Rank as ResMed.
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