ResMed Inc.RMD is scheduled to report its fourth-quarter fiscal 2015 earnings results on July 30, after the market opens.
Last quarter, the company had delivered a positive earnings surprise of 1.56%. ResMed's earnings have outpaced the Zacks Consensus Estimate in three of the past four quarters, with an average beat of 0.03%. Let's see how things are shaping up prior to this announcement.
Factors at Play
ResMed has consistently focused on product development and innovation to maintain its leadership position in the sleep disordered breathing (SDB) market and expand its sales base. These products are expected to lend it a competitive edge in fiscal 2015 and beyond.
During the recently completed fourth quarter, ResMed launched its Lumis series of noninvasive, user-friendly, wireless ventilation devices in the European market. Management expects ResMed's growth momentum and leadership in the European home ventilation market to stay intact in fiscal 2015 and beyond. We believe this device launch will actively drive ResMed's expectation in this regard.
Additionally, in the fourth quarter, ResMed revealed positive data validating the clinical efficacy of S+, its non-contact personalized sleep solution. We expect the company to witness higher demand for its S+ device in the near future buoyed by the study results, the effect of which should start being reflected in the fourth quarter top-line results itself.
Also, to consolidate further in the home medical equipment (HME) market, ResMed acquired CareTouch - a leading provider of internet-based and therapy-focused resupply solutions that facilitate the HME industry, in June 2015. We believe the CareTouch acquisition is yet another attempt on ResMed's part to capture a larger share of the billion-dollar worth HME market, in the near as well as longer term.
On the flip side, early in the fourth quarter, ResMed declared that SERVE-HF, a randomized controlled Phase III trial, has failed to meet its primary endpoint. Although management is working hard to resolve the issue, the said trial result is a major setback for the company's shareholders.
Looking forward, in the fourth quarter of fiscal 2015, management expects ResMed's gross margin in the band of 59-60%. However, factors influencing the gross margin, like currency fluctuations and geographic and product mix, might sway this range further if they vary beyond the company's expectation.
Our proven model does not conclusively show that ResMed is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: ResMed has an earnings ESP of 0.00%.That is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 64 cents.
Zacks Rank: ResMed has a Zacks Rank #4 (Sell).We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider instead as our model shows they have the right combination of elements to post an earnings beat in the upcoming quarter:
HCA Holdings, Inc. HCA has an earnings ESP of +2.24% and a Zacks Rank #2.
DENTSPLY International Inc. XRAY has an earnings ESP of +1.47% and a Zacks Rank #2.
Myriad Genetics Inc. MYGN has an earnings ESP of +2.44% and a Zacks Rank #3.
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