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ResMed (RMD) Q1 Earnings Surpass Estimates, Margins Rise

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Zacks Equity Research
·5 min read
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ResMed Inc. RMD announced strong first-quarter fiscal 2021 results, wherein adjusted earnings per share (EPS) came in at $1.27, up 37% year over year. The metric also beat the Zacks Consensus Estimate by 29.6%.

Increase in demand for the company’s ventilators and ventilation mask systems and provision of digital health solutions and other tools to customers aiding remote care amid the pandemic boosted ResMed’s sales during the fiscal first quarter.

GAAP earnings per share of $1.22 improved 47% year over year.

Revenues

Fiscal first-quarter revenues, on a reported basis, increased 10% year over year (up 9% at constant exchange rate or CER) to $751.9 million. The figure beat the Zacks Consensus Estimate by 7.1%.

A Closer View of Q1 Top Line

Excluding Software-as-a-Service (SaaS), total Sleep and Respiratory Care, revenues in the United States, Canada and Latin America improved 8.9% from the prior-year period to $403.2 million. SaaS revenues grew 6% reportedly to $92.1 million.

ResMed Inc. Price, Consensus and EPS Surprise

ResMed Inc. Price, Consensus and EPS Surprise
ResMed Inc. Price, Consensus and EPS Surprise

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

Total Sleep and Respiratory Care revenues in combined Europe, Asia, and other markets grew 15% on a reported basis and 10% at CER to $256.6 million.

Global revenues from total Sleep and Respiratory Care in the quarter under review were $751.9 million, up 10% at reported basis and 9% at CER.

Overall increase in revenues was driven by robust performance of its mask and device product portfolios on increased demand for ventilators and ventilator masks.

Margins

Adjusted gross profit in the quarter under review rose 11.3% to $450.6 million despite a 9.2% uptick in cost of sales (excluding expenses related to amortization of acquired intangibles).

Adjusted gross margin for the fiscal first quarter was 59.9%, reflecting a 46-basis point (bps) expansion from the year-ago number on benefits from favorable product mix and foreign exchange movements, partially offset by increased costs associated with logistics and procurement together with declines in average selling prices.

Selling, general and administrative expenses were down 5% year over year to $158.9 million (unchanged at CER). Research and development expenses increased 13.5% to $54.5 million.

Adjusted operating income was $237.1 million in the quarter under discussion, up 25.1% from the year-ago quarter. Adjusted operating margin expanded 370 bps year over year to 31.5%.

Financial Updates

ResMed exited the first quarter of fiscal 2021 with cash and cash equivalents of $421.4 million compared with $463.2 million at the end of the fiscal 2020. Total debt (short and long-term) at the end of fiscal 2020 was $1.06 billion compared with $1.18 billion at the end of fiscal 2020.

Cash flow from operating activities at the end of the first quarter was $143.9 million compared with $162.4 million a year ago.

The company paid out $56.5 million as dividends during the fiscal first quarter.

Our Take

ResMed delivered solid first-quarter fiscal 2021 results, with earnings and revenues beating the Zacks Consensus Estimate. It is encouraging to note that ResMed registered growth at CER across both its key operating segments — Total Sleep and Respiratory Care and SaaS. The reopening of sleep labs and physician practices across many geographies and robust adoption of digital health solutions look encouraging. Ventilators and mask sales were particularly strong on ramped up production and sales of the same amid the pandemic.

In the quarter, the company reported sequential improvement in new patient volume as well as the ongoing strong adoption of mask and accessories resupply programs. It has also accelerated the launch of digital health solutions to help clinicians remotely diagnose, treat, and manage patients during the pandemic and beyond.Expansion of both margins buoys optimism.

Zacks Rank and Key Picks

ResMed currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Thermo Fisher Scientific Inc. TMO and Align Technology, Inc. ALGN.

West Pharmaceutical reported third-quarter 2020 adjusted EPS of $1.15, beating the Zacks Consensus Estimate by 13.9%. Net revenues of $548 million outpaced the consensus estimate by 7.2%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Thermo Fisher, a Zacks Rank #2 company, reported third-quarter 2020 adjusted EPS of $5.63, beating the Zacks Consensus Estimate by 28.8%. Revenues of $8.52 billion outpaced the consensus mark by 10%.

Align Technology reported third-quarter 2020 adjusted EPS of $2.25, surpassing the Zacks Consensus Estimate by a stupendous 281.4%. Net revenues of $734.1 million exceeded the Zacks Consensus Estimate by 38%. It currently sports a Zacks Rank #1.

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ResMed Inc. (RMD) : Free Stock Analysis Report
 
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