A month has gone by since the last earnings report for ResMed (RMD). Shares have lost about 3.9% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ResMed due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ResMed Q2 Earnings Beat Estimates
ResMed announced second-quarter fiscal 2020 results, wherein adjusted earnings per share were $1.21, up 21% year over year. The metric also beat the Zacks Consensus Estimate by 19.8%.
On a GAAP (reported) basis, earnings per share were $1.10 for the quarter under review, reflecting an increase of 27.9% from the year-ago period.
Second-quarter revenues, on a reported basis, increased 13.1% year over year (up 14% at constant exchange rate or CER) to $736.2 million. The figure surpassed the Zacks Consensus Estimate by 1.5%.
Non-GAAP revenues (adding back fair value adjustment of deferred revenues) were $736.8 million, reflecting an improvement of 12.8% from the year-ago adjusted figure.
A Closer View of the Top Line
Geographically, excluding SaaS, revenues in the United States, Canada and Latin America improved 14% from the prior-year period to $408 million on robust performance of its mask and device product portfolios.
Global revenues from SaaS in the quarter under review summed $86.7 million, representing a 37% increase year over year.
Revenues in combined Europe, Asia and other markets were $241.5 million, highlighting an 8% rise at CER from the year-earlier number.
Margins
Gross margin for the fiscal second quarter was 59.7%, reflecting a 72-basis point (bps) expansion from the year-ago number. The expansion was fueled by benefits from changes in product mix, and manufacturing and procurement efficiencies.
Selling, general and administrative expenses were up 6.1% year over year to $171.4 million (up by 8% at constant exchange rate or CER). However, excluding the effects of recent acquisitions, the metric rose to 23.3% year over year (or up 2% at CER).
Research and development expenses increased 15.8% to $49.9 million (up 18% at CER). This, in turn, increased adjusted operating expenses by 8.1%, which amounted to $221.4 million. However, adjusted operating margin in the reported quarter expanded 209 bps to 29.6%.
Financial Updates
ResMed exited the second quarter of fiscal 2020 with cash and cash equivalents of $204.1 million compared with $172.2 million at the end of the first quarter.
Cumulative cash flow from operating activities was $232.3 million at the end of the second quarter compared with $177.6 million in the year-ago period.
Along with the earnings release, ResMed announced a regular quarterly dividend payout of 39 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, ResMed has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, ResMed has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
ResMed Inc. (RMD): Free Stock Analysis Report
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