ResMed's Q4 Earnings Surpass Estimates, Margins Expand

ResMed Inc.'s RMD adjusted earnings per share in the fourth quarter of fiscal 2024 were $2.08, up 30% year over year. The metric beat the Zacks Consensus Estimate by 2.5%.

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 $1.98, up 26.9% from the year-ago quarter.

For the full year, the adjusted EPS of $7.72 topped the Zacks Consensus Estimate by 0.3%. The metric increased 19.9% from the fiscal 2023 adjusted figure.

Revenues

On a reported basis, fiscal fourth-quarter revenues increased 9% year over year (up 10% at the constant exchange rate or CER) to $1.22 billion. The figure topped the Zacks Consensus Estimate by 0.7%.

Full-year revenues were $4.69 billion, a 10.9% improvement on a reported basis from fiscal 2023 (up 11% at CER). The metric came almost in line with the Zacks Consensus Estimate.

A Closer View of the Q4 Top Line

Total Sleep and Respiratory Care revenues improved 9% (up 9% at CER) from the prior-year period to $1.07 billion. This also topped our model's projected revenues of $1.04 billion.

Software-as-a-Service (SaaS) revenues grew 10% year over year to $151.9 million, which fell short of our model's projection of $154.2 million.

Revenues in the combined Europe, Asia and other markets rose 7% on a reported basis (up 8% at CER) to $343.9 million. Our model had anticipated $324.7 million.

Global Revenues comprised Total Devices revenues of $635.1 million, up 5% (6% at CER), and Total Masks and other revenues of $436.2 million, up 14% (up 15% at CER), all on a year-over-year basis. Our model projected $629 million and $415.2 million in revenues for Total Devices and Total Masks and other, respectively, in the fiscal fourth quarter.

Margins

The adjusted gross profit in the quarter under review rose 15.6% to $723.5 million despite a 0.7% 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 fourth quarter was 59.2%, reflecting an expansion of 338 basis points (bps).

SG&A expenses rose 0.6% year over year to $242.2 million. R&D expenses increased 3.5% to $80.9 million. The adjusted operating income was $400.5 million in the quarter under discussion, up 30.5% from the year-ago quarter. The adjusted operating margin expanded 538 bps year over year to 32.7%.

Financial Updates

ResMed exited the fourth quarter of fiscal 2024 with cash and cash equivalents of $238.4 million compared with $227.9 million at fiscal 2023-end.   

Total debt (short and long-term) was $706.3 million compared with $1.44 billion at the end of fiscal 2023.

The cumulative net cash provided by operating activities at the end of the fiscal fourth quarter was $1.40 billion compared with $693.3 million in the year-ago period. 

The company paid out $71 million in dividends in the fiscal fourth quarter and also repurchased 232,000 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 fourth quarter of fiscal 2024. The consistent patient and customer demand for the company's products and software solutions remained robust, leading to solid growth across its devices, masks and software businesses. In addition, the team's emphasis on operating excellence, ongoing cost discipline and accelerating profitable growth resulted in gross margin expansion, strong operating leverage and double-digit growth in bottom-line profitability.

Furthermore, ResMed continues to increase the availability and production of its AirSense 11 and AirCurve11 platforms worldwide, securing regulatory clearances and launching these technologies in various countries. The masks and accessories business also grew strong, expanding in a competitive category globally. All these developments look encouraging for the stock.

Zacks Rank and Key Picks

ResMed currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Abbott Laboratories, Inc. ABT and Quest Diagnostics DGX.

Intuitive Surgical reported a third-quarter 2024 adjusted EPS of $1.78, which beat the Zacks Consensus Estimate by 16.3%. Revenues of $2.01 billion topped the consensus estimate by 2%. ISRG currently sports a Zacks Rank #1 (Strong Buy).

Intuitive Surgical has an estimated long-term earnings growth rate of 16.1% in 2024 compared with the industry's 14.1%. The company's earnings surpassed estimates in each of the trailing four quarters, the average being 8.97%.

Abbott, carrying a Zacks Rank #2 (Buy), reported third-quarter 2024 earnings of $1.14, which surpassed the Zacks Consensus Estimate by 3.6%. Revenues of $10.38 billion topped the Zacks Consensus Estimate by 0.3%. 

ABT has an estimated earnings growth rate of 10.1% for 2025 compared    with the S&P 500's 9.3%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 2.34%.

Quest Diagnostics, carrying a Zacks Rank #2, reported a third-quarter adjusted EPS of $2.35, which surpassed the Zacks Consensus Estimate by 1.7%. Revenues of $2.40 billion exceeded the Zacks Consensus Estimate by 0.5%.

DGX's historical five-year earnings growth rate of 7.4% compared favorably with the industry's 4.2%. The company surpassed earnings estimates in each of the trailing four quarters, the average being 3.31%.

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