Despite beating fourth-quarter earnings forecasts with net profit up 30% to US$380 million for the three months ended 30 June, shares in ResMed (ASX: RMD) may struggle to open higher this morning after shares in the sleep health products group were sold off by 1.5% in New York trading overnight.
Due to strong demand for its sleep apnoea devices and a predicted higher-than-expected improvement in gross margins for the year ahead the dual-listed California-based stock announced a 37% jump in full year profit to June 30 to $1.4 billion (A$2.2 billion) while revenue was up 10% to $5.1 billion.
Also beating consensus expectations, June quarter sales were up 9% on a constant currency basis to $1.35 billion, while operating income increased 19% to $455 million due to above-market rest of world growth.
Operating cash flow increased by 22% to $539 million, supporting a net cash position of US$541 million.
The group will pay a 13% higher quarterly dividend of 60 cents per share and will increase its share buyback scheme to $150 million per quarter.
Commenting on today’s market update Resmed’s Chairman and CEO, Mick Farrell reassured the market that the company was confident of maintaining sales growth for its breathing machines and other sleep devices, despite the widespread take-up of weight loss drugs.
"Our strong finish to fiscal year 2025 reflects ongoing momentum across our business, driven by robust global demand for our market-leading sleep and breathing health devices, as well as our expanding digital health ecosystem,” he said.
"As we move into fiscal year 2026, we will continue to invest in innovation, scale our digital health capabilities, and partner with patients, providers, payers, and policymakers to ensure more people around the world have access to the care they need to sleep better, breathe better, and live longer and healthier lives.”
Ahead of this earnings release, the estimate revision trend for ResMed was mixed.
The current consensus EPS estimate is US$2.49 on $1.32 billion in revenues for the coming quarter and $10.46 on $5.52 billion in revenues for the current fiscal year.
Wilson Advisory expects gross margin expansion to become the stock's major theme for FY26-FY28.
The broker remains overweight on Resmed with a CHESS Depositary Interests price target of $43.50 under review.
Resmed has a market cap of $24.7 billion; the share price is up 31% in the last year and up 15% year to date.
The stock is in a strong bullish trend confirmed by multiple indicators. Specifically, a 5-day moving average of the stock price is above the 50-day moving average.
Consensus is Moderate Buy.
The stock closed at $42.45 yesterday.
