ResMed Inc. RMD is gaining from the global supply of its cloud-connected platforms, AirSense10 and AirSense11. The MEDIFOX DAN business contributes to the robust organic growth of the SaaS business, raising optimism. However, escalating debt levels and the competitive landscape are a concern.
In the past six months, this Zacks Rank #2 (Buy) stock has gained 44% compared with a 11.7% rise of the industry and a 18.1% increase of the S&P 500 composite.
The renowned medical device company has a market capitalization of $32.11 billion. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in another. It has an average earnings surprise of 2.81%.
Let’s delve deeper.
Upsides
Robust Mask Sales: ResMed continues to see strong demand for its market-leading mask portfolio, gaining from a competitor’s recall.
The company continues to witness strong growth in the U.S. mask and accessories business, where resupply programs are powered by its digital health ecosystem, including AirView for physicians, Brightree for home care medical equipment providers and myAir for patients. Outside the United States, the company is focused on developing, launching and scaling its direct outreach and subscription programs to help consumers take control of their health and engage directly in refreshing their masks, tubing, humidifiers and other accessories.
Potential in Digital Health: ResMed is progressing across several digital health technology initiatives further to increase the value proposition for its connected healthcare ecosystem. The company’s two key global customer-facing software products — AirView and myAir — are 100% in the cloud.
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Currently, ResMed is investing in a portfolio of artificial intelligence-driven capabilities, as well as customer-facing AI products in the company’s ecosystem. These AI-driven data products will provide personalized suggestions to increase patient therapy adherence and ultimately improve patient outcomes. The company is pleased to see that the early testing feedback in both customer groups has been positive.
Increased Focus on International Markets: ResMed continues to invest and expand its presence in high-growth markets like China, South Korea, India, Brazil and many countries in Eastern Europe.
Sales in Europe, Asia and other markets increased by 3% in the third quarter of fiscal 2024. Globally, device sales increased by 5%, while masks and other sales increased by 10%. Device sales in the U.S., Canada and Latin America increased by 7% supported by solid ongoing new patient diagnoses. Masks and other sales increased by 12%, reflecting growth in resupply and new patient setups.
Downsides
Escalating Debt Level: The company’s high debt level is a concern. As of Mar 31, 2024, long-term debt was $997 million, while the cash and cash equivalents balance was only $238 million. A higher debt level induces higher interest payments, which comes with the risk of failure to pay the same. At the end of third-quarter fiscal 2024, the company has a times-interest-earned ratio of 22.6%, lower than third-quarter fiscal 2024 ratio of 29%.
Competitive Landscape: The market for SDB products is highly competitive with respect to product price, features and reliability. ResMed’s primary competitors include Philips BV, DeVilbiss Healthcare, Fisher & Paykel Healthcare Corporation Limited, Apex Medical Corporation, BMC Medical Co. Ltd., and regional manufacturers. The disparity between the company’s resources and those of its competitors may increase due to consolidation in the healthcare industry.
Estimate Trend
The Zacks Consensus Estimate for RMD’s fiscal 2024 earnings per share (EPS) has moved down from $7.43 to $7.64 in the past 90 days.
The Zacks Consensus Estimate for the company’s fiscal 2024 revenues is pegged at $4.66 billion, suggesting an increase of 10.5% from the year-ago reported figure.
Key Picks
Some better-ranked stocks in the broader medical space are Hims & Hers Health HIMS, High Tide HITI and Medpace MEDP.
Hims & Hers Health, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated 2024 earnings growth rate of a staggering 263.6% compared with the industry’s 18.1%. HIMS’ earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 79.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hims & Hers Health’s shares have rallied 53.4% against the industry’s 25.8% decline in the past year.
High Tide, sporting a Zacks Rank #1 at present, has an estimated 2024 earnings growth rate of 100%. HITI’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 91.7%.
The stock has surged 57.9% compared with the industry’s 1% rise in the past year.
Medpace, also sporting a Zacks Rank #1 at present, has an estimated 2024 earnings growth rate of 27.1% compared with the industry’s 13.8%. MEDP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.8%.
Shares of MEDP have skyrocketed 87.7% compared with the industry’s 6.1% growth in the past year.
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ResMed Inc. (RMD) : Free Stock Analysis Report
Medpace Holdings, Inc. (MEDP) : Free Stock Analysis Report
Hims & Hers Health, Inc. (HIMS) : Free Stock Analysis Report
High Tide Inc. (HITI) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
