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ResMed Inc.'s (RMD - Free Report) adjusted earnings per share (EPS) in the second quarter of fiscal 2023 were $1.66, up 12.9% year over year. The metric also exceeded the Zacks Consensus Estimate by 3.8%.
The adjustments include certain non-recurring expenses/benefits like amortization of acquired intangibles and acquisition-related expenses, among others.
GAAP EPS in the reported quarter was $1.53, up 11.7% from the year-ago quarter’s EPS.
Revenues
Fiscal second-quarter revenues on a reported basis increased 16% year over year (up 20% at the constant exchange rate or CER) to $1.03 billion. The figure beat the Zacks Consensus Estimate by 3.6%.
A Closer View of the Q2 Top Line
Total Sleep and Respiratory Care revenues improved 15% (up 20% at CER) from the prior-year period to $917 million.
Total Sleep and Respiratory Care revenues in Europe, Asia and other markets fell 16% on a reported basis and 6% at CER to $266.3 million. This comprised Total Devices revenues of $542.8 million, up 20% (up 25% at CER) and Total Masks and other revenues of $374.2 billion up 9% (up 13% at CER), all on a year-over-year basis.
Meanwhile, Software as a Service (SaaS) revenues grew 9% to $116.8 million (up 20% at CER).
The revenue growth in the quarter was backed by increased demand for the company’s sleep products across its portfolio and ongoing device demand generated by ResMed’s competitors' product recall. Year-on-year movements in foreign exchange, in particular, a weaker euro, negatively impacted revenues by approximately $36 million in the reported quarter.
Margins
Adjusted gross profit in the quarter under review rose 13.9% to $587 million, despite a 17.8% uptick in the cost of sales (excluding expenses related to amortization of acquired intangibles and restructuring). However, the adjusted gross margin for the fiscal second quarter was 56.9%, reflecting an 83-basis point (bps) contraction.
The decrease was predominantly attributable to an unfavorable product mix due to increased flow generator sales as well as unfavorable foreign currency movements, partially offset by increases in average selling prices.
Selling, general and administrative expenses rose 14.2% year over year to $211.7 million. Research and development expenses increased 11.8% to $69.9 million.
Adjusted operating income was $305.5 million in the quarter under discussion, up 14.1% from the year-ago quarter. Adjusted operating margin however contracted 36 bps year over year to 29.6%.
Financial Updates
ResMed exited the second quarter of fiscal 2023 with cash and cash equivalents of $253.2 million, compared with $207.2 million at the end of the first quarter of fiscal 2023. Total debt (short and long-term) at the end of the fiscal second quarter was 1.80 billion, compared with $795.2 million at the end of the fiscal first quarter.
The cumulative net cash provided by operating activities at the end of the fiscal second quarter was $128.6 million, compared with $219.9 million in the year-ago period.
The company paid out $64.5 million as dividends during the fiscal second quarter.
Our Take
ResMed exited the second quarter of fiscal 2023 with better-than-expected earnings and revenues. The company recorded a robust sales performance in the quarter on increased demand for sleep and respiratory care devices. Mask sales growth was strong across the globe, reflecting a post-COVID pandemic awareness about the importance and need for respiratory hygiene and respiratory health.
The company registered strong customer uptake of the re-engineered AirSense 10 Card-to-Cloud device.
However, the FX headwind negatively impacted revenues by approximately $36 million in the reported quarter.
The contraction of the gross operating margin as a result of escalating expenses is discouraging. The persistent supply chain constraints in a challenging freight environment are hampering ResMed’s ability to meet the growing device demand.
Cardinal Health (CAH - Free Report) will release fourth-quarter 2022 results on Feb 2.
Cardinal Health has a long-term expected earnings growth rate of 11.7%. Cardinal Health’s earnings yield of 6.87% compares favorably with the industry’s 4.34%.
McKesson Corporation (MCK - Free Report) will release third-quarter fiscal 2023 results on Feb 1.
MCK’s long-term historical earnings growth rate is estimated at 10.1%. MCK’s earnings yield of 6.49% compares favorably with the industry’s 4.34%.
Laboratory Corporation of America Holdings or LabCorp (LH - Free Report) will release fourth-quarter 2022 results on Feb 16.
LabCorp’s long-term historical earnings growth rate is estimated at 26.1%. LabCorp’s earnings yield of 7.02% compares favorably with the industry’s 4.34%.
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ResMed's (RMD) Q2 Earnings Beat Estimates, Margins Falls
ResMed Inc.'s (RMD - Free Report) adjusted earnings per share (EPS) in the second quarter of fiscal 2023 were $1.66, up 12.9% year over year. The metric also exceeded the Zacks Consensus Estimate by 3.8%.
The adjustments include certain non-recurring expenses/benefits like amortization of acquired intangibles and acquisition-related expenses, among others.
GAAP EPS in the reported quarter was $1.53, up 11.7% from the year-ago quarter’s EPS.
Revenues
Fiscal second-quarter revenues on a reported basis increased 16% year over year (up 20% at the constant exchange rate or CER) to $1.03 billion. The figure beat the Zacks Consensus Estimate by 3.6%.
A Closer View of the Q2 Top Line
Total Sleep and Respiratory Care revenues improved 15% (up 20% at CER) from the prior-year period to $917 million.
Total Sleep and Respiratory Care revenues in Europe, Asia and other markets fell 16% on a reported basis and 6% at CER to $266.3 million. This comprised Total Devices revenues of $542.8 million, up 20% (up 25% at CER) and Total Masks and other revenues of $374.2 billion up 9% (up 13% at CER), all on a year-over-year basis.
ResMed Inc. Price, Consensus and EPS Surprise
ResMed Inc. price-consensus-eps-surprise-chart | ResMed Inc. Quote
Meanwhile, Software as a Service (SaaS) revenues grew 9% to $116.8 million (up 20% at CER).
The revenue growth in the quarter was backed by increased demand for the company’s sleep products across its portfolio and ongoing device demand generated by ResMed’s competitors' product recall. Year-on-year movements in foreign exchange, in particular, a weaker euro, negatively impacted revenues by approximately $36 million in the reported quarter.
Margins
Adjusted gross profit in the quarter under review rose 13.9% to $587 million, despite a 17.8% uptick in the cost of sales (excluding expenses related to amortization of acquired intangibles and restructuring). However, the adjusted gross margin for the fiscal second quarter was 56.9%, reflecting an 83-basis point (bps) contraction.
The decrease was predominantly attributable to an unfavorable product mix due to increased flow generator sales as well as unfavorable foreign currency movements, partially offset by increases in average selling prices.
Selling, general and administrative expenses rose 14.2% year over year to $211.7 million. Research and development expenses increased 11.8% to $69.9 million.
Adjusted operating income was $305.5 million in the quarter under discussion, up 14.1% from the year-ago quarter. Adjusted operating margin however contracted 36 bps year over year to 29.6%.
Financial Updates
ResMed exited the second quarter of fiscal 2023 with cash and cash equivalents of $253.2 million, compared with $207.2 million at the end of the first quarter of fiscal 2023. Total debt (short and long-term) at the end of the fiscal second quarter was 1.80 billion, compared with $795.2 million at the end of the fiscal first quarter.
The cumulative net cash provided by operating activities at the end of the fiscal second quarter was $128.6 million, compared with $219.9 million in the year-ago period.
The company paid out $64.5 million as dividends during the fiscal second quarter.
Our Take
ResMed exited the second quarter of fiscal 2023 with better-than-expected earnings and revenues. The company recorded a robust sales performance in the quarter on increased demand for sleep and respiratory care devices. Mask sales growth was strong across the globe, reflecting a post-COVID pandemic awareness about the importance and need for respiratory hygiene and respiratory health.
The company registered strong customer uptake of the re-engineered AirSense 10 Card-to-Cloud device.
However, the FX headwind negatively impacted revenues by approximately $36 million in the reported quarter.
The contraction of the gross operating margin as a result of escalating expenses is discouraging. The persistent supply chain constraints in a challenging freight environment are hampering ResMed’s ability to meet the growing device demand.
Zacks Rank and Upcoming Releases
ResMed currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cardinal Health (CAH - Free Report) will release fourth-quarter 2022 results on Feb 2.
Cardinal Health has a long-term expected earnings growth rate of 11.7%. Cardinal Health’s earnings yield of 6.87% compares favorably with the industry’s 4.34%.
McKesson Corporation (MCK - Free Report) will release third-quarter fiscal 2023 results on Feb 1.
MCK’s long-term historical earnings growth rate is estimated at 10.1%. MCK’s earnings yield of 6.49% compares favorably with the industry’s 4.34%.
Laboratory Corporation of America Holdings or LabCorp (LH - Free Report) will release fourth-quarter 2022 results on Feb 16.
LabCorp’s long-term historical earnings growth rate is estimated at 26.1%. LabCorp’s earnings yield of 7.02% compares favorably with the industry’s 4.34%.