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ResMed (RMD) Stock Hits New 52-Week High: What's Driving It?

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Zacks Equity Research
·4 min read
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Shares of ResMed Inc. RMD reached a new 52-week high of $167.65 on Feb 4, before closing the session marginally lower at $166.85. The stock has rallied 0.9% since its second-quarter fiscal 2020 earnings announcement on Jan 30.

The company’s strong second-quarter fiscal 2020 earnings results, backed by robust segmental and global revenue growth, prompted the rally. Currently, ResMed is reinforcing focus toward its core sleep apnea franchise, digital health technology and international markets.

Let us delve deeper.


Fiscal Q2 Performance

ResMed exited second-quarter fiscal 2020 on a solid note, with better-than-expected numbers. It is encouraging to note that ResMed registered growth at CER across both its key operating segments — Total Sleep and Respiratory Care and Software-as-a-Service (or SaaS).

Mask sales were particularly strong in Europe and Asia. The double-digit geographic revenue improvement backed by robust performance of the company’s mask and device product portfolios in the United States, Canada and Latin America (excluding SaaS) buoys optimism. Within SaaS, it recorded continued momentum in the Brightree service portfolio and an additional contribution from the MatrixCare buyout. Global revenues from SaaS also witnessed robust growth.

Other Growth Drivers

Potential in Digital Health: Investors are upbeat about ResMed’s focus on digital health technology. The Brightree and MatrixCare software systems are significantly contributing to the company’s capabilities of managing 90 million more people outside the hospital setting. Given that digital health technology is an integrator across everything that the company does; AirView, myAir, Propeller and a portfolio of other digital health solutions support its plans of reaching out to more customers and partners.

Partnerships: Within its SaaS portfolio, the company inked a collaboration deal with Cerner as a new preferred provider for home health and hospice software. This partnership strengthens ResMed’s position as an industry-leading provider of digital health solutions for out-of-hospital healthcare. Investors are optimistic about the partnership progressing well, even though it is in early stage.

Emphasis on Product Development: ResMed’s focus on product development and innovation to maintain leadership position in the sleep-disordered breathing (SDB) market and to expand its sales base buoys optimism. The company recently expanded its AirFit mask portfolio by introducing the world’s first tube-down nasal cradle CPAP mask with a front-facing tube, AirFit N30, in the United States. Later, it will be available in other countries as well.

Zacks Rank & Other Key Picks

Currently, the company carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader medical space are Stryker Corporation SYK, Hill-Rom Holdings, Inc. HRC and Myomo, Inc. MYO.

Stryker currently sports a Zacks Rank #2 and has a projected long-term earnings growth rate of 9.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hill-Rom’s long-term earnings growth rate is estimated at 11.1%. The company presently carries a Zacks Rank of 2.

Myomo’s long-term earnings growth rate is expected at 25%. It currently has a Zacks Rank #2.

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