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ResMed (RMD) Rides on Innovation Amid Reimbursement Woes

Zacks

On Dec 1, 2017, we issued an updated research report on leading medical devices company, ResMed Inc. RMD. The stock carries a Zacks Rank #3 (Hold).

ResMed exited the first quarter of fiscal 2018 on a promising note with better-than-expected earnings and revenue performances. The company achieved solid double-digit global revenue growth this quarter, led by sales from Software-as-a-Service businesses as well as its new mask products and devices.

Notably, the company has achieved strong global revenue growth over the past few quarters, led by sales of sleep devices, respiratory care devices, mask systems and software solutions. Also, the buyout of Brightree has acted as a significant contributor to the company’s operating results through 2017. We believe, ResMed’s product launches and strategies to gain traction in the SDB market, which in turn are likely to boost its performance in the near term. Additionally, the company’s recently-launched AirFit N20 Classic nasal mask for positive airway pressure treatment in Europe buoys optimism.

Significantly, ResMed continues to invest and expand its footprint in high-growth markets like China, South Korea, India, Brazil and many countries in the Eastern Europe. Interestingly, in each region, the company is implementing long-term strategies to improve the quality of patient life for the purpose of delivering better-patient outcomes and reduce overall system healthcare costs in the respective countries. In the first quarter of fiscal 2017, the company generated 11% revenue growth at constant exchange rate in the combined EMEA and APAC region.


In the past six months, ResMed has traded above the broader industry. The stock has rallied 18.8%, higher than the broader industry’s 5.1% gain.

However, challenges like competitive bidding and reimbursement issues continue to plague the stock. The company also remains exposed to foreign exchange fluctuations. Rising operating expenses and a weak operating margin are other major concerns.

Key Picks

Some better-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS, Myriad Genetics, Inc. MYGN and Luminex Corporation LMNX, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has surged roughly 74.1% in a year.

Myriad Genetics has a long-term expected earnings growth rate of 15%. The stock has soared 107.9% over a year.

Luminex has a long-term expected earnings growth rate of 16.3%. The stock has gained 7.9% over the last year.

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New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.

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