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ResMed (RMD) Q3 Earnings to Gain From Growing Ventilator Sales

Zacks Equity Research

ResMed Inc. RMD is set to report third-quarter fiscal 2020 results on Apr 30, after the closing bell.

In the last reported quarter, the company reported a positive earnings surprise of 19.8%. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on all occasions, the average positive beat being 8.9%.

Let’s take a look at how things are shaping up prior to this announcement.

Factors at Play

Since the beginning of the third quarter, ResMed has been ramping up its ventilator and other respiratory support devices business worldwide to meet the demand for ventilation therapy required for the treatment of COVID-19 patients. With this, the company is expected to mitigate the negative impacts of the coronavirus-led economic doldrums, which have been plaguing the healthcare industry all over the globe.

ResMed Inc. Price and EPS Surprise

 

ResMed Inc. Price and EPS Surprise
ResMed Inc. Price and EPS Surprise

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

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Meanwhile, let us delve deeper into how the company’s core business segments have progressed during the third quarter.

Sleep and Respiratory Care

The third-quarter fiscal 2020 results are likely to reflect continued momentum in this segment across major geographies. However, ResMed is facing declining device sales in France due to the 2018 and 2019 digital health-related fleet upgrades. The decline has likely persisted in the third quarter.

The masks and accessories category of business is expected to contribute to the top line significantly on increasing adoption. Flagship products like the AirFit F20 and the AirFit N20 have been witnessing an expanding market share of late. Notably, the company launched its first tube-up full face continuous positive airway pressure (CPAP) mask, AirFit F30i, in the third quarter, thus completing its full-face mask portfolio in the market. This is expected to contribute to third-quarter top line on increased adoption.

Software-as-a-Solutions (SaaS)

The Brightree and MatrixCare software systems are significantly boosting the company’s capabilities of managing 90 million more people outside the hospital setup. This is likely to get reflected in the third quarter results.

The Estimate Picture

The Zacks Consensus Estimate for third-quarter fiscal 2020 revenues is pegged at $722.3 million, indicating an improvement of 9.1% from the year-ago figure. The same for earnings per share is pinned at $1, suggesting growth of 12.4%.

What Our Model Suggests

Per our proven model, a stock with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has good chances of beating estimates. However, this is not the case here as you can see:

Zacks Rank: The company currently carries a Zacks Rank #2.

Earnings ESP: ResMed has an Earnings ESP of -13.22%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks Worth a Look

Here are a few medical stocks worth considering, as these have the right combination of elements to beat on earnings this reporting cycle.

Exact Sciences Corporation EXAS currently carries a Zacks Rank of 2 and has an Earnings ESP of +26.79%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aphria Inc. APHA, carrying a Zacks Rank of 2 at present, has an Earnings ESP of +35.71%.

DexCom, Inc. DXCM is a Zacks #2 Ranked stock with an Earnings ESP of +143.90%.

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DexCom, Inc. (DXCM) : Free Stock Analysis Report
 
ResMed Inc. (RMD) : Free Stock Analysis Report
 
Exact Sciences Corporation (EXAS) : Free Stock Analysis Report
 
Aphria Inc. (APHA) : Free Stock Analysis Report
 
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