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ResMed Inc RMD

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Sleep Device Sales Falter in ResMed’s Third Quarter but Has Little Bearing on Our Long-Term View

Analyst Note

| Johannes Faul, CFA |

Coronavirus continues to suppress sleep apnea diagnosis rates and hence Resmed’s sleep device sales in third-quarter fiscal 2021, but still broadly track our full-year expectations for a pandemic-softened showing. However, better-than-expected mask sales--in combination with a time value of money adjustment--lead us to upgrade narrow-moat Resmed’s fair value estimate by 3% to USD 149. Our AUD equivalent valuation is unchanged at AUD 19, given the recent strength of the AUD. ResMed guided to low-single-digit sequential revenue growth in the fourth quarter and still benefits from reduced travel expenses. Accordingly, we increase our underlying fiscal 2021 EBIT forecast by 4% to USD 907 million, but our five-year EBIT CAGR forecast is unchanged at 9%. While ResMed stands to benefit from structural trends in respiratory and digital health, as well as the launch of its next generation AirSense 11 product in the U.S. later this calendar year, shares continue to screen as overvalued at current levels.

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Company Profile

Business Description

ResMed is one of the largest global respiratory medical devices companies, primarily developing and supplying flow generators, masks and accessories for the treatment of sleep apnea. Increasing diagnosis of sleep apnea combined with ageing populations and increasing prevalence of obesity is resulting in a structurally growing market. The company earns 65% of revenue in the Americas and the balance across other regions dominated by Europe, Japan and Australia. Recent developments and acquisitions have focused on digital health as ResMed is aiming to differentiate itself through the provision of clinical data for use by the patient, medical care advisor and payer in the out-of-hospital setting.

9001 Spectrum Center Boulevard
San Diego, CA, 92123
T +1 858 836-5000
Sector Healthcare
Industry Medical Instruments & Supplies
Most Recent Earnings Mar 31, 2021
Fiscal Year End Jun 30, 2021
Stock Type Aggressive Growth
Employees 7,770