ResMed (RMD) Q2 Earnings Beat Estimates, Margins Expand

ResMed Inc.’s RMD adjusted earnings per share (EPS) for the second quarter of fiscal 2024 were $1.88, up 13.3% year over year. The metric beat the Zacks Consensus Estimate by 3.9%.

The adjustments include certain non-recurring expenses/benefits like the amortization of acquired intangibles, restructuring and masks with magnets field safety notification expenses, among others.

GAAP EPS in the reported quarter was $1.42, down 7.2% from the year-ago quarter.

Revenues

On a reported basis, fiscal second-quarter revenues increased 12% year over year (up 11% at constant exchange rate or CER) to $1.16 billion. The figure matched the Zacks Consensus Estimate.

A Closer View of the Q2 Top Line

Total Sleep and Respiratory Care revenues improved 11% (up 10% at CER) from the prior-year period to $1.02 billion.

Total Sleep and Respiratory Care revenues in Europe, Asia and other markets rose 16% on a reported basis (up 12% at CER) to $348.5 million.

In the United States, Canada and Latin America, total Sleep and Respiratory Care revenues were $669.3 million, up 9% year over year.

ResMed Inc. Price, Consensus and EPS Surprise

ResMed Inc. Price, Consensus and EPS Surprise

ResMed Inc. price-consensus-eps-surprise-chart | ResMed Inc. Quote

Global Revenues comprised Total Devices revenues of $606 million, up 12% (11% at CER), and Total Masks and other revenues of $411.9 million, up 10% (up 9% at CER), all on a year-over-year basis.

Software-as-a-Service (SaaS) revenues grew 24% year over year to $144.9 million.

Margins

The adjusted gross profit in the quarter under review rose 12.7% to $661.5 million despite a 12.2% uptick in the adjusted cost of sales (excluding the amortization of acquired intangibles, masks with magnets field safety notification expenses and Astral field safety notification expenses).

Adjusted gross margin for the fiscal second quarter was 56.9%, reflecting an expansion of 11 basis points (bps) on lower freight costs, increase in average selling prices and favorable foreign currency movements.

SG&A expenses rose 4.9% year over year to $222.2 million. R&D expenses increased 5.7% to $73.9 million.

The adjusted operating income was $365.5 million in the quarter under discussion, up 19.7% from the year-ago quarter. The adjusted operating margin expanded 188 bps year over year to 31.4%.

Financial Updates

ResMed exited the second quarter of fiscal 2024 with cash and cash equivalents of $210.2 million compared with $209.1 million at the end of the fiscal first quarter. Total debt (short and long-term) at the end of the fiscal second quarter was $1.26 billion compared with $1.36 billion at the end of the fiscal first quarter.

The cumulative net cash provided by operating activities at the end of the fiscal second quarter was $559.1 million compared with $173.3 million in the year-ago period.  

The company paid out $70.7 million in dividends in the fiscal second quarter.

Our Take

ResMed’s second-quarter fiscal 2024 earnings beat estimates while revenues matched the same. The company reported strong double-digit growth across its combined device, masks and accessories and residential care software businesses.

Revenue growth was driven by ongoing patient flow and solid demand across the global sleep and respiratory care markets, along with the increasing adoption of the company’s outside hospital software solution.

Further, the results reflected cost discipline to support an acceleration in profitability.

Zacks Rank and Key Picks

ResMed currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are SiBone SIBN, Surgery Partners SGRY and Haemonetics HAE, each carrying a Zacks Rank 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SiBone’s fourth-quarter 2023 bottom line is pegged at a loss of 28 cents, implying a 12.9% improvement from the year-ago period. The consensus estimate for revenues is pegged at $38.6 million, suggesting 20.8% growth from the fourth quarter of 2022.

SiBone has an estimated long-term earnings growth rate of 14.9% compared with the industry’s 13.4% growth. SIBN’s earnings surpassed estimates in all the trailing four quarters, the average being 24.21%.

The consensus estimate for Surgery Partners’ fourth-quarter 2023 EPS is pegged at 37 cents, implying a 37% improvement from the year-ago period. Revenues are projected to be $741.5 million, suggesting 4.9% growth from the fourth quarter of 2022.

Surgery Partners’ 2024 earnings growth rate is predicted to be 4.8%, while the revenue growth rate is estimated to be 9.2%. SGRY’s earnings surpassed estimates in all the trailing four quarters, the average being 316.07%.

The consensus mark for Haemonetics’ third-quarter fiscal 2024 EPS is pegged at 97 cents, implying a 14.1% improvement from the year-ago period. Projected revenues of $322.5 million suggest 5.6% growth from the fiscal third quarter of 2023.

Haemonetics has a historical long-term earnings growth rate of 9.4% compared with the industry’s 7.5% growth. HAE’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.08%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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