Why Is ResMed (RMD) Up 8.4% Since the Last Earnings Report?

It has been more than a month since the last earnings report for ResMed Inc. RMD. Shares have added about 8.4% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

ResMed announced first-quarter fiscal 2018 adjusted earnings per share (EPS) of 66 cents, up 6.5% from the prior-year quarter. Earnings also beat the Zacks Consensus Estimate by a penny.

Including one-time items, ResMed reported EPS of 60 cents in the quarter, up 11.1% year over year.

Revenues in Details

Revenues in the reported quarter increased 12.5% year over year (up 11% at constant exchange rate or CER) to $523.7 million. The figure also beat the Zacks Consensus Estimate of $501 million.

On a geographic basis, excluding Brightree, revenues in the Americas totaled $296.6 million, reflecting an 11% increase over the prior-year quarter. Moreover, revenues from Brightree in the reported quarter totaled $38.1 million, up 15% year over year. Revenues in combined EMEA and APAC were $189 million, highlighting an 11% year over year rise at CER.

Adjusted gross margin contracted 56 basis points (bps) year over year to 58.4% in the reported quarter. Selling, general and administrative expenses were up 11.6% year over year to $143.8 million, while there was an 8.6% increase in Research and Development expenses to $37.4 million. This led to an 11% rise in adjusted operating expenses, which amounted to $181.2 million. Accordingly, adjusted operating margin in the quarter contracted 9 bps to 23.7%.

Financial Update

ResMed exited first-quarter fiscal 2018 with cash and cash equivalents of $811.1 million, compared with $821.9 million at the end of fiscal 2017.

Year to date, the company generated $93.9 million of cash flow from operations, up from the year-ago figure of $86.2 million.

Concurrent to its first-quarter earnings release, ResMed announced a regular quarterly dividend of 35 cents per share. The dividend will be paid on Dec 14, to shareholders of record as on Nov 9.

As previously declared, ResMed temporarily suspended its share repurchase program due to the recent acquisitions. However, the company still expects to recommence the buy-back program sometime in fiscal 2018.

Guidance

Management expects SG&A expenses, as a percentage of revenues, at around 26% at the end of fiscal 2018. R&D expenses, as a percentage of revenues, are projected at 7% for fiscal 2018. This reflects marketing expenses associated with product launches along with the ongoing legal expenses.

How Have Estimates Been Moving Since Then?

Fresh estimate followed a flat path over the past two months.

ResMed Inc. Price and Consensus

 

ResMed Inc. Price and Consensus | ResMed Inc. Quote

VGM Scores

Currently, ResMed's stock has an average Growth Score of C, though it is lagging on the momentum front with D. The stock was allocated also a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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