ResMed Inc. RMD has been gaining from several sales-building efforts — including product launches and acquisitions. The company has been strengthening its focus on international markets. It has also been utilizing increasing opportunities in the new markets.
Over the past year, shares of the Zacks Rank #1 (Strong Buy) stock have outperformed its industry. The stock has gained 32.4% compared with 3.5% growth of its industry. Also, ResMed has outperformed the S&P 500’s 11.6% rise during the same period.
The cloud-connected medical devices and out-of-hospital software-as-a-service (“SaaS”) business provider has a market capitalization of $21.51 billion. It has projected growth of 12.9% for the next five years. Also, the company delivered a positive earnings surprise of 5.3%, on average, over the trailing four quarters. It is expected to scale new highs in the near term.
Per our Style Score, ResMed has a Growth Score of B, which is reflective of its strong potential. Our research shows that stocks with a Growth Style Score of A or B combined with a Zacks Rank #1 or 2 (Buy) offer the best upside possibility.
Let’s delve deeper into the factors, which indicate that the company is a worthy investment choice right now.
Factors Driving the Stock
Product Launches: We are upbeat about ResMed’s slew of product launches in the current year. The full commercial launch of its portable oxygen concentrator (Mobi) in the United States for Chronic Obstructive Pulmonary Disease (COPD) or other chronic diseases was completed in January 2019. Encouraged by favorable customer response, the company plans to launch Mobi in other countries as well by the end of 2019, after acquiring necessary clearances. ResMed also launched an automated ReSupply solution for all home medical equipment (HME) providers in the United States.
Further, it expanded the AirFit mask portfolio by introducing AirFit N30i (a nasal CPAP mask) in the United States. ResMed’s three most recent mask launches, namely, F30, N30i and P30i, have been contributing to the top line significantly. In October 2019, it launched N30, the latest tube-down nasal cradle CPAP mask.
Acquisitions and Partnerships: ResMed’s alliance with Cerner Corporation is expected to assist care providers in making more informed treatment decisions, thereby reducing costs and delivering hassle-free healthcare. This is likely to aid ResMed’s SaaS portfolio.
In March, ResMed acquired home medical equipment provider HB Healthcare in South Korea. This enabled the company to reach millions of patients through HB Healthcare’s wide network of distributor partners.
Early this year, ResMed acquired Propeller Health (a digital therapeutics company that provides connected health solutions for COPD and asthma patients). This marks a significant value-addition to ResMed’s respiratory care portfolio.
ResMed is currently working on the collaboration with Verily to develop software solutions, which will assist healthcare providers to discover, diagnose, treat and manage sleep apnea and other breathing-related sleep conditions.
Further, ResMed signed a deal with pharmaceutical retailer Walgreens. With this, customers can manage chronic diseases by using Walgreens’ Find Care health platform, utilizing Propeller.
End-Market Growth: The company expects strong growth for atrial fibrillation and chronic disease management segments. It has been witnessing robust growth in its Brightree service portfolio, and additional contributions from MatrixCare and HEALTHCAREfirst buyouts. ResMed is also strengthening its focus on the development of homecare ventilation for COPD, Amyotrophic Lateral Sclerosis (ALS) and other respiratory disorders for the emerging markets in China, India and Brazil.
Which Way Are Estimates Heading?
ResMed is witnessing an impressive estimate revision trend for the current year. Over the past 60 days, the Zacks Consensus Estimate for its earnings has moved 3.5% north to $4.10.
The Zacks Consensus Estimate for the company’s 2020 revenues is pegged at $2.89 billion, suggesting 10.7% rise from the year-ago reported number.
Other Key Picks
Some other top-ranked stocks from the broader medical space are Haemonetics Corporation HAE, National Vision Holdings, Inc EYE and NuVasive, Inc NUVA.
Haemonetics, currently flaunting a Zacks Rank #1, has a projected long-term earnings growth rate of 13.5%.
National Vision’s long-term earnings growth rate is estimated at 17.8%. The company currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
NuVasive’s long-term earnings growth rate is estimated at 10.9%. It currently carries a Zacks Rank #2.
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