ResMed Inc. RMD has witnessed strong momentum in the past year. Shares of the company have risen 37.8% compared with 10.7% growth of the industry during the same time frame. The S&P 500 composite has increased 26.2%.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #2 (Buy) company appears to be a solid wealth creator for its investors at the moment.
ResMed designs, manufactures and distributes generators, masks, and related accessories worldwide for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. The company operates under two segments — Sleep and Respiratory Care and Software-as-a-Service (SaaS).
The Sleep and Respiratory Care segment includes Devices, and Masks and other. Devices include continuous positive airway pressure, variable positive airway pressure and AutoSet systems for the titration and treatment of SDB. ResMed operates the SaaS business in the United States and Germany, including out-of-hospital software platforms.
Factors Favoring RMD’s Share Growth
ResMed's share price is trending upward, prompted by robust mask sales, flourishing respiratory care products and complete focus on international expansion. This optimism, led by a solid fiscal first-quarter performance and increasing sales of both operating segments, is expected to contribute further.
Investors showed optimism about ResMed's AirTouch N30i, the first fabric mask. Additionally, in September, the company launched a few new patient-centric products to enhance the therapy journey for sleep apnea patients. Accordingly, the recent launches bolstered investor confidence in RMD’s growth prospects.
ResMed exited the fiscal first quarter of 2025 with impressive results. The strong year-over-year top-line and bottom-line performances were impressive. The growth was driven by robust revenue increase across all product and geographic categories. Moreover, new patient activations as well as the ongoing ReSupply programs contributed to the growth.
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RMD reported an adjusted gross profit of $724.9 million in the fiscal first quarter, marking a 17.5% year-over-year increase. The gross margin improved 324 basis points (bps) to 59.2%. Adjusted operating income rose to $406.4 million, reflecting a 27.7% increase from the fiscal first quarter of 2024, with the adjusted operating margin expanding 431 bps to 33.2%. The improvement in both margins has positively impacted the stock, contributing to its price increase.
Factors That May Offset RMD’s Gains
During the fiscal first quarter of 2025, SG&A and R&D expenses rose 7.2% and 5%, respectively, year over year. This was due to headwinds arising from the Middle East conflict, fluctuations in foreign currency exchange rates and volatility in capital markets. Furthermore, with sustained inflationary pressures in the future, the company may struggle to keep its operating expenses as a percentage of net revenues in check.
A Look at Estimates
ResMed’s earnings per share (EPS) in fiscal 2025 are expected to grow 21.1% to $9.35 on a year-over-year basis. The Zacks Consensus Estimate for fiscal 2025 EPS has moved north 0.7% to $9.35 in the past 30 days.
Revenues for fiscal 2025 are anticipated to rise 8.9% to $5.10 billion on a year-over-year basis.
Other Stocks to Consider
Some other top-ranked stocks in the broader medical space are Omnicell OMCL, Masimo MASI and Abbott Laboratories ABT.
Omnicell, carrying a Zacks Rank #2 at present, has an estimated EPS growth rate of 5.9% for 2025. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
OMCL’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 121.74%. Its shares have risen 31.6% against the industry’s 12.8% decline in the past year.
Masimo, carrying a Zacks Rank #2 at present, has an estimated growth rate of 11.8% for 2025. MASI’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 17.10%. Its shares have risen 51.4% compared with the industry’s 6.8% growth in the past year.
Abbott, carrying a Zacks Rank of 2 at present, has an estimated earnings growth rate of 10% for 2025. It delivered a trailing four-quarter average earnings surprise of 1.64%. ABT’s shares have risen 10.5% in the past six months compared with the industry’s 8.6% growth.
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