) reported second-quarter fiscal 2014 (ended Dec 31, 2013)
adjusted earnings per share of 60 cents, missing the Zacks
Consensus Estimate of 63 cents. Results, however, surpassed the
prior-year quarter's earnings of 53 cents per share, registering
an increase of 13.2% year over year. The year-over-year
improvement in earnings resulted from higher revenues and a lower
Revenues in Details
Revenues, which grew 2.1% year over year to $384.3 million,
were well below the Zacks Consensus Estimate of $396 million.
Global revenues were driven by higher sales of flow generators,
accompanied with healthy sales of masks spares and
On a geographic basis, revenues in the Americas declined 2%
from the year-ago quarter to $206.6 million, while sales outside
the Americas increased 8% year over year (5% on a constant
Europe experienced steep regional growth in the quarter, along
with robust sales recorded in countries like the U.K.,
Switzerland and some emerging markets.
ResMed's gross margin was 64.7% in the reported quarter,
reflecting a massive expansion of 292 basis points (bps) year
over year, on account of favorable currency movements, a healthy
product mix and strong manufacturing efficiencies. However, this
rise was partially offset by a decline in Average Selling
Research and development expenses were $29.5 million or 7.7 %
of revenues, compared with $30.3 million or 8% of revenues in the
Selling, general and administration expenses, which accounted for
29.1% of revenues in second quarter fiscal 2014 (compared to
28.6% of revenues in the year-ago quarter), amounted to $111.7
million, up 3.6% year over year.
Income from operations came in at $105 million, reflecting an
upside of 14.1% from the prior-year quarter. The company posted
net income of $86.6 million in the quarter, exhibiting an
increase of 11.2% over the year-ago quarter.
ResMed exited fiscal second quarter with cash and cash
equivalents of $972.7 million compared with $976.5 million at the
end of Sep 30, 2013.
The company generated $84.2 million in cash flow from operations,
reflecting strong underlying earnings and effective working
Capital expenditure was $19.7 million, while depreciation and
amortization stood at $18.6 million. ResMed also repurchased 1.5
million shares for $74 million in the reported quarter. At the
end of the quarter, the company still had 2.6 million shares
remaining under its authorized buyback program.
ResMed's second-quarter fiscal 2014 results were disappointing
with the company missing the Zacks Consensus Estimate on both
fronts - earnings and revenues. It is currently facing challenges
like market restructuring due to competitive bidding,
reimbursement pressure and increasing competition particularly in
the flow generator space, along with foreign currency headwinds.
Additionally, a slowdown in the market demand can also act as a
deterrent to growth, going forward.
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However, new product launches, strong product pipeline and robust
growth in the European and emerging markets are likely to boost
investor confidence in the near term.
ResMed currently carries a Zacks Rank #3 (Hold). However,
better-ranked companies like
Mead Johnson Nutrition Company
) are expected to do well in the health care industry. While
NuVasive sports a Zacks Rank #1 (Strong Buy), Covidien and Mead
Johnson Nutrition Company carry a Zacks Rank #2 (Buy).