Reasons to Retain ResMed Stock in Your Portfolio for Now

ResMed Inc.'s RMD growth is backed by its impressive global Mask sales growth. Of late, the company has been experiencing increased Device sales, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices. However, concerns loom over ResMed's escalating debt level and the adverse impact of macroeconomic challenges.

In the past year, this Zacks Rank #3 (Hold) company's shares have surged 66.9% compared with 16.9% growth of the industry. The S&P 500 composite rose 21.1% during the same time frame.

The renowned medical device company has a market capitalization of $37.15 billion. ResMed projects an estimated earnings growth rate of 15.4% for 2025 compared with 15.3% of the industry. In the trailing four quarters, RMD delivered an average earnings surprise of 4.47%.

Let's delve deeper.

ResMed: Key Upsides

Robust Mask Sales: ResMed continues to see strong demand for its market-leading mask portfolio. Continued product development is driving growth within this business globally. The company has successfully introduced a full suite of masks in its AirFit and, AirTouch and other ranges. It 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. RMD's recently introduced AirFit F40 performed extremely well in the United States during the fiscal fourth quarter.

Recovery in Device Sales: ResMed's increased Device sales continue to drive overall revenue growth, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices to support the strong underlying global demand. The company has consistently witnessed strong sales within this business with the launch of its new platform of connected CPAP and APAP devices, AirSense 11.

Total devices accounted for approximately 52% of net revenues in fiscal 2024. Global Device sales grew 8% reportedly and 7% on a constant currency basis in the financial year. Sales of flow generator devices, including the AirSense 11 platform, grew 6% year over year globally.

ResMed: Key Downsides

Escalating Debt Level: The company's high debt level is a concern. As of June 31, 2024, long-term debt was $697.3 million, while cash and cash equivalents totaled $238.4 million. A higher debt level induces higher interest payments, thereby increasing the risk of failure to repay debt. At the end of the fourth quarter of fiscal 2024, the company had a payout rate of 24.8%, down sequentially.

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Challenging Macroeconomic Scenario: Global macroeconomic conditions, primarily headwinds arising from the Middle East conflict, are denting growth. Further, fluctuations in foreign currency exchange rates and volatility in capital markets could continue to affect ResMed's results of operations. Due to unfavorable general economic conditions, ResMed's profitability could decline and negatively impact its overall financial performance. During the fiscal fourth quarter, SG&A and R&D expenses rose 0.6% and 3.5%, respectively, year over year.

Estimate Trend

The Zacks Consensus Estimate for 2025 earnings per share has moved north 2.2% to $8.91 in the past 30 days.

The Zacks Consensus Estimate for the company's 2025 revenues is pegged at $5.03 billion, suggesting a 7.3% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are TransMedix Group TMDX, Intuitive Surgical ISRG and Boston Scientific.

TransMedix Group's earnings are expected to surge 255.8% in 2024. The company's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 287.5%. Shares of the company have risen 127.9% in the past year compared with the industry's 13.9% growth.

TMDX sports a Zacks Rank #1 (Strong Buy) at present.

Intuitive Surgical, sporting a Zacks Rank of 1 at present, has an estimated long-term earnings growth rate of 17.4% compared with the industry's 13.7%. Shares of the company have risen 60.1% compared with the industry's 13.9% growth over the past year.

ISRG's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.97%.

Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, has an estimated earnings growth rate of 17.1% for 2024 compared with the industry's 15.7%. In the past year, shares of BSX have risen 52.9% compared with the industry's 16.9% growth.

BSX's earnings surpassed estimates in each of the trailing four quarters, the average surprise being 7.2%.

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