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ResMed's (RMD) Q4 Earnings Beat Estimates, Margins Expand

Zacks Equity Research

ResMed Inc. RMD announced fourth-quarter fiscal 2019 adjusted earnings per share (EPS) of 95 cents, flat with the year-ago number. The metric, however, beat the Zacks Consensus Estimate by 3.3%.

Reported EPS was 48 cents for the quarter under review, reflecting a steep drop from 76 cents a year ago.

For fiscal 2019, adjusted EPS came in at $3.64, up 3.1% from the year-ago period. The figure beat the Zacks Consensus Estimate by 0.8%.

Revenues in the reported quarter increased 13% year over year (up 15% at constant exchange rate or CER) to $704.9 million. The figure surpassed the Zacks Consensus Estimate by 0.5%.

For fiscal 2019, revenues totaled $2.61 billion, up 11% from the year-ago period (up 13% at constant exchange rate or CER). The top line was marginally in line with the Zacks Consensus Estimate.

ResMed Inc. Price, Consensus and EPS Surprise

 

ResMed Inc. Price, Consensus and EPS Surprise

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

A Closer View of the Top Line

Geographically, excluding Software as a Service, revenues in the United States, Canada and Latin America improved 11% over the prior-year period to $385.5 million.

Global revenues from Software as a Service in the quarter under consideration summed $85.2 million, representing a 111% jump year over year. Revenues in the combined EMEA and APAC region were $234.3 million, highlighting a 4% rise at CER from the year-earlier tally.

Margins

Gross margin for the fiscal fourth quarter was 59.3%, translating to a 115-basis point (bps) expansion from the year-ago number.

Selling, general and administrative expenses were up 9.4% year over year to $171.6 million while Research and development expenses increased 28.9% to $51.1 million. This, in turn, induced a 13.4% rise in adjusted operating expenses, which amounted to $222.7 million. However, adjusted operating margin in the reported quarter expanded 106 bps to 27.7%.

Financial Updates

ResMed exited fiscal 2019 with cash and cash equivalents of $147.1 million compared with $188.7 million at the end of year-ago period.      

For the full year, the company generated $459.1 million of cash flow from operations compared with the year-ago figure of $505 million.

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

Our Take

ResMed exited fiscal 2019 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. However, in this quarter, device sales in France and Japan were impacted as customers completed their connected device upgrade programs.

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 across the Brightree service potfolio and incremental contribution from the buyouts of MatrixCare and HEALTHCAREfirst.

Zacks Rank & Key Picks

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

A few better-ranked stocks in the broader medical space are Hologic Inc. HOLX, DENTSPLY SIRONA Inc. XRAY and Teleflex Inc. TFX.

Hologic is scheduled to release second-quarter 2019 results on Jul 31. The Zacks Consensus Estimate for the quarter’s adjusted EPS is pegged at 61 cents and for revenues stands at $834.6 million. The stock sports a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY SIRONA is scheduled to release second-quarter 2019 results on Aug 2. The Zacks Consensus Estimate for the period’s adjusted EPS is 62 cents and for revenues, $1.03 billion. The stock carries a Zacks Rank #1.

Teleflex is expected to release second-quarter 2019 results on Aug 1. The Zacks Consensus Estimate for adjusted EPS for the to-be-reported quarter is $2.59 and for the top line, $636.7 million. The stock has a Zacks Rank of 2.

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