Australia markets open in 2 hours 47 minutes

    +3.40 (+0.05%)

    +0.0028 (+0.44%)
  • ASX 200

    +3.60 (+0.05%)
  • OIL

    +0.30 (+0.33%)
  • GOLD

    -0.70 (-0.04%)
  • Bitcoin AUD

    -148.00 (-0.36%)
  • CMC Crypto 200

    -2.18 (-0.38%)

ResMed's (RMD) Mask Sales Drive Growth, Margin Issue Lingers

ResMed RMD continues to see growth in patient diagnosis trends in sleep apnea, COPD and asthma. Yet, we are worried about the stiff competition faced by ResMed. The stock carries a Zacks Rank #3 (Hold).

In the past year, ResMed has outperformed its industry. The stock has lost 18.7% compared with the 51.7% decline of the industry.

ResMed exited the second quarter of fiscal 2023 with better-than-expected earnings and revenues. The company recorded a robust sales performance in the quarter on increased demand for sleep and respiratory care devices. Mask sales growth was strong across the globe, reflecting the post-COVID pandemic awareness about the importance and need for respiratory hygiene and respiratory health. The company registered strong customer uptake of the re-engineered AirSense 10 Card-to-Cloud device.

To meet the additional demand in relation to a competitor’s recall, the company is working closely with its global supply chain partners to improve access to additional supplies of critical components. The company is also reengineering designs, validating new parts, pieces, supplies and speeding up product launches and development to keep up with demand.

ResMed Inc. Price

ResMed Inc. Price
ResMed Inc. Price

ResMed Inc. price | ResMed Inc. Quote

ResMed continues to see robust demand for its market-leading mask portfolio despite being faced with challenges related to lower new patient setups from a competitor recall. The company recorded increased masks and other sales in the United States, Canada and Latin America region in the fiscal second quarter, where growth was 11% on a reported basis, reflecting solid resupply revenues amid a challenging device-supply environment. Masks and other sales in Europe, Asia and other markets increased 14% in constant currency terms.

On the flip side, ResMed did not derive any incremental revenues from COVID-related demand in the fiscal second quarter 2023 compared with the year-ago period. During the quarter, ResMed’s selling, general and administrative expenses rose 14.2% year over year, predominantly on increases in employee-related expenses, professional service fees and travel expenses.

Meanwhile, research and development expenses increased 11.8%. The rising expenses resulted in an adjusted operating margin contraction of 36 basis points year over year to 29.6%, thus weighing on the company’s bottom line. The persistent supply-chain challenges related to securing sufficient components hamper its ability to meet the growing device demand.

The volatility surrounding COVID-related restrictions across the globe also continues to pose challenges. Further, pricing pressure in the United States and Europe has been a staggering issue over the past few quarters. Healthcare reform in the United States has resulted in a degree of uncertainty for medical device companies and created a less flexible pricing environment. Currency headwinds continue to affect ResMed's overseas sales.

Key Picks

Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Cardinal Health, Inc. CAH and Merit Medical Systems, Inc. MMSI.

AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcare has gained 5.4% against the industry’s 19.6% decline in the past year.

Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.6%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 6.4%.

Cardinal Health has gained 48.7% against the industry’s 0.8% decline over the past year.

Merit Medical, flaunting a Zacks Rank #2 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.

Merit Medical has gained 28.1% against the industry’s 0.8% decline over the past year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Cardinal Health, Inc. (CAH) : Free Stock Analysis Report

ResMed Inc. (RMD) : Free Stock Analysis Report

Merit Medical Systems, Inc. (MMSI) : Free Stock Analysis Report

AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research