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ResMed's (RMD) Q1 Earnings Beat Estimates, Margins Expand

Zacks Equity Research

ResMed Inc. RMD announced first-quarter fiscal 2020 adjusted earnings per share (EPS) of 93 cents, up 14.8% year over year. The metric also beat the Zacks Consensus Estimate by 6.9%.

Reported EPS was 83 cents for the quarter under review, reflecting an increase of 13.7% from the year-ago period.

Revenues in the reported quarter increased 15.8% year over year (up 17% at constant exchange rate or CER) to $681.1 million. The figure surpassed the Zacks Consensus Estimate by 3.6%.

A Closer View of the Top Line

Geographically, excluding Software-as-a-Service, revenues in the United States, Canada and Latin America improved 13% over the prior-year period to $370.3 million,led by robust performance by its mask and device product portfolios.

Global revenues from Software as-a-Service in the quarter under consideration summed $86.9 million, representing an 83% jump year over year.

ResMed Inc. Price, Consensus and EPS Surprise

 

ResMed Inc. Price, Consensus and EPS Surprise

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

Revenues in the combined EMEA and APAC region were $223.9 million, highlighting a 8% rise at CER from the year-earlier tally.

Margins

Gross margin for the fiscal first quarter was 59.5%, translating to a 115-basis point (bps) expansion from the year-ago number.

Selling, general and administrative expenses were up 13.7% year over year to $167.4 million, while research and development expenses increased 23.8% to $48 million. This, in turn, induced a 15.8% rise in adjusted operating expenses, which amounted to $215.5 million. However, adjusted operating margin in the reported quarter expanded 115 bps to 27.8%.

Financial Updates

ResMed exited the first quarter of fiscal 2020 with cash and cash equivalents of $172.2 million compared with $147.1 million at the end of fiscal 2019.      

Along with the earnings release, ResMed announced a regular quarterly dividend payout of 39 cents per share.

Our Take

ResMed exited first-quarter fiscal 2020 on a solid note with earnings and revenues beating the Zacks Consensus Estimate. It is encouraging to note that the company registered growth at CER across both its key operating segments — Total Sleep and Respiratory Care and Software as a Service. Mask sales were strong in Europe and Asia. Overall, the company achieved double-digit global revenue growth in the reported quarter, led by strong sales at Software-as-a-Service businesses as well as of new mask products and devices. Within Software-as-a-Service, the company recorded continued momentum in the Brightree service portfolio and additional contribution from the MatrixCare buyout.

However, in the quarter, device sales in France and Japan were impacted as customers completed their connected device upgrade programs.

Zacks Rank and Other Key Picks

ResMed currently has a Zacks Ranks #2 (Buy).

A few other top-ranked stocks in the broader medical space are Mckesson MCK, Stryker SYK and Syneos Health SYNH. While McKesson sports a Zacks Rank #1 (Strong Buy), the other two carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for McKesson’s second-quarter fiscal 2020 revenues is pegged at $54.94 billion, suggesting 3.5% growth from the prior-year reported figure. The same for adjusted EPS stands at $3.59.

The Zacks Consensus Estimate for Stryker’s third-quarter fiscal 2019 revenues is pegged at $3.58 billion, calling for a year-over-year increase of 10.5%. The same for adjusted EPS stands at $1.91, indicating an increase of 13% from the year-ago reported figure.

The Zacks Consensus Estimate for Syneos’ third-quarter fiscal 2019 revenues is pegged at $1.18 billion, suggesting 6.03% growth from the prior-year reported figure. The same for adjusted EPS stands at 72 cents, implying a 5.3% improvement from the year-ago reported number.

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