Yahoo Finance ResMed (RMD) Q3 Earnings Beat Estimates, Margins Expand
ResMed Inc.’s RMD adjusted earnings per share (EPS) for the third quarter of fiscal 2024 were $2.13, up 26.8% year over year. The metric beat the Zacks Consensus Estimate by 10.9%.
The adjustments include certain non-recurring expenses/benefits like the amortization of acquired intangibles, restructuring and masks with magnet field safety notification expenses, among others.
GAAP EPS in the reported quarter was $2.04, up 29.1% from the year-ago quarter.
Revenues
On a reported basis, fiscal third-quarter revenues increased 7.2% year over year (up 7% at the constant exchange rate or CER) to $1.20 billion. The figure topped the Zacks Consensus Estimate by 1.4%.
A Closer View of the Q3 Top Line
Total Sleep and Respiratory Care revenues improved 7% (up 7% at CER) from the prior-year period to $1.05 billion. This also topped our model’s projected revenues of $1.03 billion.
Revenues in the combined Europe, Asia and other markets rose 3% on a reported basis (up 3% at CER) to $361.6 million. Our model had anticipated $367.9 million.
ResMed Inc. Price, Consensus and EPS Surprise
ResMed Inc. price-consensus-eps-surprise-chart | ResMed Inc. Quote
In the United States, Canada and Latin America, revenues were $687.5 million, up 9.3% year over year. Our model’s projected revenues were $816.6 million.
Global Revenues comprised Total Devices revenues of $638.2 million, up 5% (5% at CER), and Total Masks and other revenues of $410.8 million, up 10% (up 10% at CER), all on a year-over-year basis. Our model projected $618.5 million and $414.8 million in revenues for Total Devices and Total Masks and other, respectively, in the fiscal third quarter.
Software-as-a-Service (SaaS) revenues grew 8.2% year over year to $148 million, which fell short of our model’s projection of $151.2 million.
Margins
The adjusted gross profit in the quarter under review rose 11.9% to $700.6 million despite a 1.1% uptick in the adjusted cost of sales (excluding the amortization of acquired intangibles, masks with magnet field safety notification expenses and Astral field safety notification expenses).
The adjusted gross margin for the fiscal third quarter was 58.5%, reflecting an expansion of 248 basis points (bps).
SG&A expenses rose 0.6% year over year to $229.9 million. R&D expenses increased 0.8% to $77.1 million.
The adjusted operating income was $393.6 million in the quarter under discussion, up 22.6% from the year-ago quarter. The adjusted operating margin expanded 413 bps year over year to 32.9%.
Financial Updates
ResMed exited the third quarter of fiscal 2024 with cash and cash equivalents of $237.9 million, up from the fiscal second quarter’s $210.2 million.
Total debt (short and long term) was $1.00 billion compared with $1.26 billion at the end of the fiscal second quarter.
The cumulative net cash provided by operating activities at the end of the fiscal third quarter was $402 million compared with $282.6 million in the year-ago period.
The company paid out $70 million in dividends in the fiscal third quarter and also repurchased 261,000 shares for consideration of $50 million as part of its ongoing capital management.
Our Take
ResMed delivered better-than-expected earnings and revenues in the third quarter of fiscal 2024. The company's products and software solutions experienced robust patient and customer demand, leading to double-digit mask and accessories revenue growth. The bottom line also benefited from ResMed’s ongoing operational efficiencies to drive margin improvement and increased profitability, buoying optimism.
Further, the expansion of margins during the quarter is highly encouraging. ResMed is committed to bringing market-leading innovation to its customers, including the latest AirCurve11 range of non-invasive ventilators and the recently launched AirFit F40 mask system. The continuous organic growth of the company's SaaS portfolio is also a promising trend. All these developments bode well for the stock.
Zacks Rank and Other Key Picks
ResMed currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the broader medical space are Inspire Medical Systems INSP, Transmedics Group TMDX and HCA Healthcare HCA.
Inspire Medical Systems, sporting a Zacks Rank #1 (Strong Buy), reported a fourth-quarter 2023 EPS of 49 cents, which beat the Zacks Consensus Estimate of a loss of 4 cents. Revenues of $192.5 million topped the consensus estimate by 0.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Inspire Medical Systems has an estimated earnings growth rate of 51.4% in 2024 compared with the industry’s 19.4%. The company’s earnings surpassed estimates in each of the trailing four quarters, the average being 353.6%.
Transmedics Group, sporting a Zacks Rank #1, reported a fourth-quarter 2024 EPS of 12 cents compared to the Zacks Consensus Estimate of a loss of 8 cents per share. Revenues of $81.2 million outpaced the Zacks Consensus Estimate by 18.9%.
TMDX has an estimated 2024 earnings growth rate of 81.8% compared to the industry’s 14.6%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 107.8%.
HCA Healthcare, carrying a Zacks Rank #2, reported a fourth-quarter 2023 EPS of $5.90, which surpassed the Zacks Consensus Estimate by 16.8%. Revenues of $17.3 billion topped the Zacks Consensus Estimate by 4.5%.
HCA has an estimated long-term earnings growth rate of 10.1% in 2024 compared with the industry’s 9.9% growth. The company’s earnings surpassed estimates in three of the trailing four quarters and missed in one, the average surprise being 9.8%.
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