ResMed's (RMD) Q4 Earnings Miss, Revenues Beat Estimates
ResMed Inc.’s RMD adjusted earnings per share (EPS) in the fourth quarter of fiscal 2023 were $1.60, up 7.4% year over year. However, the metric missed the Zacks Consensus Estimate by 4.2%.
The adjustments include certain non-recurring expenses/benefits like the amortization of acquired intangibles, restructuring and acquisition-related expenses, among others.
GAAP EPS in the reported quarter was $1.56, up 17.3% from the year-ago quarter’s EPS.
For the full year, adjusted EPS was $6.44, lagging the Zacks Consensus Estimate by 0.9%. Adjusted EPS, however, increased 11.2% from the fiscal 2022 adjusted figure.
Revenues
Fiscal fourth-quarter revenues on a reported basis increased 23% year over year (same at the constant exchange rate or CER) to $1.12 billion. The figure beat the Zacks Consensus Estimate by 0.4%.
The year-on-year movements in foreign exchange negatively impacted revenues by approximately $3 million in the fiscal fourth quarter.
Full-year revenues were $4.22 billion, an 18% improvement on a reported basis from fiscal 2022 (up 21% at CER). Full-year revenues matched the Zacks Consensus Estimate.
ResMed Inc. Price, Consensus and EPS Surprise
ResMed Inc. price-consensus-eps-surprise-chart | ResMed Inc. Quote
A Closer View of the Q4 Top Line
Total Sleep and Respiratory Care revenues improved 21% (up 21% at CER) from the prior-year period to $983.5 million.Going by our model, the Total Sleep and Respiratory Care segment globally was projected to rise 9.3% year over year on a reported basis in the fiscal fourth quarter.
Total Sleep and Respiratory Care revenues in Europe, Asia and other markets rose 14% on a reported basis (same at CER) to $322.6 million.
In U.S., Canada, and Latin America, total Sleep and Respiratory Care revenues were $660.9 million, up 25% year over year.
Global Revenues comprised Total Devices revenues of $602.4 million, up 24% (same at CER) and Total Masks and other revenues of $381 billion, up 17% (up 18% at CER), all on a year-over-year basis.
Global Device revenues, per our model, were expected to grow 11.2% in the fiscal fourth quarter. Global Masks and other revenues, according to our model, were expected to grow 6.3% in the fourth quarter.
Meanwhile, Software-as-a-Service (SaaS) revenues grew 34% to $138.6 million year over year.
Margins
The adjusted gross profit in the quarter under review rose 18.3% to $625.8 million, despite a 28.6% uptick in the adjusted cost of sales (excluding the amortization of acquired intangibles).
However, the adjusted gross margin for the fiscal fourth quarter was 55.8%, reflecting a contraction of 205 basis points (bps). This decrease can be mainly attributed to component cost increases, warranty and manufacturing-related cost increases and product mix shifts due to the significant increase in sleep device sales, partially offset by increases in average selling prices.
SG&A expenses rose 24.7% year over year to $240.7 million. Research and development expenses increased 21.5% to $78.1 million.
The adjusted operating income was $306.9 million in the quarter under discussion, up 13% from the year-ago quarter. However, the adjusted operating margin contracted 233 bps year over year to 27.4%.
Financial Updates
ResMed exited the fourth quarter of fiscal 2023 with cash and cash equivalents of $227.9 million, compared with $273.7 million at the end of fiscal 2022. Total debt (short and long-term) at the end of the fiscal fourth quarter was $1.44 billion compared with $775.2 million at the end of the fiscal 2022.
The cumulative net cash provided by operating activities at the end of the fiscal fourth quarter was $237.4 million compared with $79.5 million in the year-ago period.
The company paid out $64.7 million in dividends in the fiscal fourth quarter.
Our Take
ResMed exited the fourth quarter of fiscal 2023 with lower-than-expected earnings but higher-than-expected revenues. The company recorded a robust sales performance in the quarter backed by the ongoing combined availability of cloud-connected AirSense 10 and AirSense 11 sleep devices to support strong underlying global demand, as well as solid growth across ResMed’s broader product portfolio.
Meanwhile, escalating costs and expenses that put pressure on the company’s gross and operating margins are worrisome. A year-over-year increase in the fiscal fourth quarter’s SG&A expenses was due to an increase in employee-related costs marketing and travel expenses, as well as the incremental SG&A expenses associated with MEDIFOX DAN that was acquired in November 2022.
Zacks Rank & Other Key Picks
ResMed currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader medical space that have announced quarterly results are Abbott Laboratories ABT, Elevance Health, Inc. ELV and Intuitive Surgical, Inc. ISRG.
Abbott, carrying a Zacks Rank of 2, reported second-quarter 2023 adjusted EPS of $1.08, beating the Zacks Consensus Estimate by 3.8%. Revenues of $9.98 billion outpaced the consensus mark by 2.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Abbott has a long-term estimated growth rate of 5.1%. ABT’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 12.4%.
Elevance Health reported a second-quarter 2023 adjusted EPS of $9.04, beating the Zacks Consensus Estimate by 2.5%. Revenues of $43.38 billion surpassed the Zacks Consensus Estimate by 4.5%. It currently carries a Zacks Rank #2.
Elevance Health has a long-term estimated growth rate of 12.1%. ELV’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 2.8%.
Intuitive Surgical reported a second-quarter 2023 adjusted EPS of $1.42, beating the Zacks Consensus Estimate by 7.6%. Revenues of $1.76 billion surpassed the Zacks Consensus Estimate by 1.4%. It currently carries a Zacks Rank #2.
Intuitive Surgical has a long-term estimated growth rate of 14.5%. ISRG’s earnings surpassed estimates in three of the trailing four quarters and missed the same once, the average surprise being 4.2%.
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