ResMed Q2 Earnings Highlights: Supply Chain Constraints, Unlimited Demand Due To Competitor Recall

ResMed Inc RMD revealed a 13% Y/Y jump in Q2 FY22 revenue to $894.9 million, missing the consensus of $935.25 million.

• The growth was below analyst expectations as the business faced increased freight and production costs.
• The Company posted an adjusted EPS of $1.47, below the consensus of $1.52.
• “Clearly the global supply chain environment remains very challenging... despite growing double digits year-on-year, we were not able to meet all the demand in the market,” Mick Farrell, CEO, said in the Q2 earnings conference call.
• Farrell said freight costs can be five- to 10-times higher now than before the pandemic. The Company has added a $12 temporary surcharge to devices to help cover its additional expenses.
• The supply shortages also restricted ResMed from fully cashing in on additional demand created when its competitor Koninklijke Philips NV PHG recalled CPAP machines last June.
• Also See: Philips Recalls Trilogy Evo Ventilators, Repair Kits For Potential Health Risks.
• The adjusted gross margin contracted 230 bps to 57.6%.
• Dividend: ResMed announced a quarterly dividend of $0.42 to be paid on March 17, with a record date of February 10.
• Guidance: Philips isn’t expected to return to the CPAP market with new machines until the end of this year. Farrell said ResMed’s revenue should increase between $300 million - $350 million in 2022 because of the Philips recall. 
• The Company expects supply challenges similar to Q2 FY22, with some extent easing in Q4 FY22 and Q1 of FY23.
• Price Action: RMD shares closed at $224.89 on Thursday.