Yahoo Finance Here's Why Investors Should Buy ResMed (RMD) Stock Now
ResMed Inc. RMD is gaining from the global supply of its cloud-connected platforms, AirSense10 and AirSense11. The strong uptake of the myAir app with Air 11 is likely to drive higher adherence to therapy in patients. However, escalating debt levels and competitive landscape are a concern.
In the past six months, this Zacks Rank #2 (Buy) stock has gained 36.7% compared with a 16.1% rise of the industry and a 23% increase of the S&P 500 composite.
The renowned medical device company has a market capitalization of $29.13 billion. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in another. It has an average earnings surprise of 1.83%.
Let’s delve deeper.
Upsides
Recovery in Device Sales: ResMed’s increased device sales continue to drive overall revenue growth, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices to support strong underlying global demand.
In the fiscal second quarter, global device sales increased by 11%. In the United States, Canada and Latin America, device sales increased by 7%, reflecting growth in resupply and new patient setups. In Europe, Asia and other markets, device sales increased 16%, reflecting strong demand and significantly improved availability of cloud-connected devices.
Increased Focus on International Markets: ResMed continues to invest and expand its presence in high-growth markets like China, South Korea, India, Brazil and many countries in Eastern Europe. Sales in Europe, Asia and other markets increased 12% in the second quarter of fiscal 2024. Globally, device sales increased by 11%, while masks and other sales increased by 9%. Device sales in the United States, Canada and Latin America increased by 7%. Masks and other sales increased by 10%, reflecting growth in resupply and new patient setups.
Potential in Digital Health: ResMed is progressing across several digital health technology initiatives further to increase the value proposition for its connected healthcare ecosystem. The company’s two key global customer-facing software products — AirView and myAir — are 100% in the cloud.
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In terms of the latest development, ResMed is leading the market in digital health technology, with more than 17 billion nights of medical data in the cloud and nearly 23.5 million cloud-connectable medical devices on people's bedside tables in 140 countries worldwide.
Downsides
Escalating Debt Level: The company’s high debt level is a concern. As of Dec 31, 2023, long-term debt was $1.26 billion, while the cash and cash equivalents balance was only $210.2 million. A higher debt level induces higher interest payments, which comes with the risk of failure to pay the same. At the end of the second quarter of fiscal 2024, the company has a times interest earned ratio of 19.7%, sequentially lower than first-quarter fiscal 2024 ratio of 21.7%.
Competitive Landscape: The market for SDB products is highly competitive with respect to product price, features and reliability. ResMed's primary competitors include Philips BV, DeVilbiss Healthcare, Fisher & Paykel Healthcare Corporation Limited, Apex Medical Corporation, BMC Medical Co. Ltd., and regional manufacturers. The disparity between the company's resources and those of its competitors may increase due to consolidation in the healthcare industry.
Estimate Trend
The Zacks Consensus Estimate for RMD’s fiscal 2024 earnings per share (EPS) has moved up from $7.39 to $7.45 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $4.65 billion, suggesting an increase of 10.03% from the year-ago reported figure.
Key Picks
Some other top-ranked stocks from the broader medical space are Stryker Corporation SYK, Cencora, Inc. COR and Cardinal Health CAH.
Stryker, carrying a Zacks Rank #2, reported a fourth-quarter 2023 adjusted EPS of $3.46, beating the Zacks Consensus Estimate by 5.8%. Revenues of $5.8 billion outpaced the consensus estimate by 3.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stryker has an estimated earnings growth rate of 11.5% for 2025 compared with the S&P 500’s 9.9%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 5.1%.
Cencora, carrying a Zacks Rank #2, reported a first-quarter fiscal 2024 adjusted EPS of $3.28, which beat the Zacks Consensus Estimate by 14.7%. Revenues of $72.3 billion outpaced the Zacks Consensus Estimate by 5.1%.
COR has an earnings yield of 5.75% compared with the industry’s 1.85%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 6.7%.
Cardinal Health, carrying a Zacks Rank #2, reported second-quarter fiscal 2024 adjusted earnings of $1.82, which beat the Zacks Consensus Estimate by 16.7%. Revenues of $57.45 billion improved 11.6% on a year-over-year basis and also topped the Zacks Consensus Estimate by 1.1%.
CAH has a long-term estimated earnings growth rate of 15.3% compared with the industry’s 11.8% growth. The company’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 15.6%
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Cencora, Inc. (COR) : Free Stock Analysis Report
