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ResMed's (RMD) SaaS Arm Strength Aids Growth, Supply Woes Stay
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ResMed Inc's (RMD - Free Report) robust uptake of AirSense 10 and AirSense 11 platforms buoys optimism. However, escalating costs and macroeconomic headwinds raise apprehension. ResMed currently carries a Zacks Rank #3 (Hold).
In the past year, ResMed has outperformed its industry. The stock has gained 35.1% against the 13.6% decline of the industry.
ResMed’s earnings met the Zacks Consensus Estimate in the second quarter of fiscal 2022 and increased year over year. The company saw increased demand for sleep and respiratory care devices on steady recovery of markets from COVID-19 impacts and a competitor’s product recall. Growth across home medical equipment and facilities and home-based care settings contributed to SaaS business revenues.
The continued robust uptake of ResMed’s AirSense 10 and AirSense 11 platforms buoys optimism for the company. In addition, the solid adoption of the AirView for ventilation software solution and ResMed’s plans to expand this technology worldwide raise investors’ confidence. Increased focus on international markets, a robust product line and strong solvency are added benefits.
In the fiscal second quarter, ResMed generated estimated incremental device revenues in the range of $45-$55 million in relation to the impact of the competitor’s recall. To meet the exceptional demand, the company is working closely with its global supply-chain partners to improve access to additional supply of the critical components. The company is also reengineering designs validating new parts, pieces, supplies and speeding up product launches and development to keep up with demand.
On the flip side, ResMed exited the fiscal second quarter with lower-than-expected revenues. During the quarter, ResMed witnessed an 18.1% uptick in cost of sales (excluding expenses related to amortization of acquired intangibles and restructuring).
Adjusted gross margin contracted 225 basis points (bps) from the year-ago number, primarily owing to higher freight component and manufacturing costs, and unfavorable currency movements, partially offset by favorable product mix changes. Moreover, selling, general and administrative expenses climbed 9.4% year over year, predominantly on employee-related expenses, while research and development expenses increased 13.8%. These escalating costs resulted in a 189-bp contraction of adjusted operating margin, thereby building significant pressure on the bottom line.
The ongoing component supply issues as well as challenges pertaining to sea and air freight are hampering the company’s ability to meet the demand for its products. Further, the emergence of the highly contagious Omicron variant of COVID-19 has been impacting patient volumes for certain verticals within the SaaS business, particularly skilled nursing facilities.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%.
Henry Schein has outperformed the industry over the past year. HSIC has gained 36.8% compared with the industry’s 11.7% rise over the past year.
Owens & Minor has a long-term earnings growth rate of 23.6%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 32.4%, on average.
Owens & Minor has outperformed the industry over the past year. OMI has gained 31.8% against a 15.3% industry decline in the said period.
AmerisourceBergen has a long-term earnings growth rate of 8.2%. In the trailing four quarters, AmerisourceBergen’s earnings surpassed estimates in three and missed in one, delivering an average surprise of 2.3%.
AmerisourceBergen has outperformed its industry in the past year, gaining 38.3% versus the industry’s 11.6% rise.
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ResMed's (RMD) SaaS Arm Strength Aids Growth, Supply Woes Stay
ResMed Inc's (RMD - Free Report) robust uptake of AirSense 10 and AirSense 11 platforms buoys optimism. However, escalating costs and macroeconomic headwinds raise apprehension. ResMed currently carries a Zacks Rank #3 (Hold).
In the past year, ResMed has outperformed its industry. The stock has gained 35.1% against the 13.6% decline of the industry.
ResMed’s earnings met the Zacks Consensus Estimate in the second quarter of fiscal 2022 and increased year over year. The company saw increased demand for sleep and respiratory care devices on steady recovery of markets from COVID-19 impacts and a competitor’s product recall. Growth across home medical equipment and facilities and home-based care settings contributed to SaaS business revenues.
The continued robust uptake of ResMed’s AirSense 10 and AirSense 11 platforms buoys optimism for the company. In addition, the solid adoption of the AirView for ventilation software solution and ResMed’s plans to expand this technology worldwide raise investors’ confidence. Increased focus on international markets, a robust product line and strong solvency are added benefits.
ResMed Inc. Price
ResMed Inc. price | ResMed Inc. Quote
In the fiscal second quarter, ResMed generated estimated incremental device revenues in the range of $45-$55 million in relation to the impact of the competitor’s recall. To meet the exceptional demand, the company is working closely with its global supply-chain partners to improve access to additional supply of the critical components. The company is also reengineering designs validating new parts, pieces, supplies and speeding up product launches and development to keep up with demand.
On the flip side, ResMed exited the fiscal second quarter with lower-than-expected revenues. During the quarter, ResMed witnessed an 18.1% uptick in cost of sales (excluding expenses related to amortization of acquired intangibles and restructuring).
Adjusted gross margin contracted 225 basis points (bps) from the year-ago number, primarily owing to higher freight component and manufacturing costs, and unfavorable currency movements, partially offset by favorable product mix changes. Moreover, selling, general and administrative expenses climbed 9.4% year over year, predominantly on employee-related expenses, while research and development expenses increased 13.8%. These escalating costs resulted in a 189-bp contraction of adjusted operating margin, thereby building significant pressure on the bottom line.
The ongoing component supply issues as well as challenges pertaining to sea and air freight are hampering the company’s ability to meet the demand for its products. Further, the emergence of the highly contagious Omicron variant of COVID-19 has been impacting patient volumes for certain verticals within the SaaS business, particularly skilled nursing facilities.
Key Picks
Some better-ranked stocks in the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , Owens & Minor, Inc. (OMI - Free Report) and AmerisourceBergen Corporation , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Henry Schein has an estimated long-term growth rate of 11.8%. Henry Schein’s earnings surpassed estimates in the trailing four quarters, the average surprise being 25.5%.
Henry Schein has outperformed the industry over the past year. HSIC has gained 36.8% compared with the industry’s 11.7% rise over the past year.
Owens & Minor has a long-term earnings growth rate of 23.6%. Owens & Minor’s earnings surpassed estimates in the trailing four quarters, delivering a surprise of 32.4%, on average.
Owens & Minor has outperformed the industry over the past year. OMI has gained 31.8% against a 15.3% industry decline in the said period.
AmerisourceBergen has a long-term earnings growth rate of 8.2%. In the trailing four quarters, AmerisourceBergen’s earnings surpassed estimates in three and missed in one, delivering an average surprise of 2.3%.
AmerisourceBergen has outperformed its industry in the past year, gaining 38.3% versus the industry’s 11.6% rise.