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ResMed Inc RMD

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Morningstar’s Analysis

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Economic Moat




ResMed Faces Near-Term Headwinds but Long-Run Strategy and Outlook Sound

Analyst Note

| Johannes Faul, CFA |

While narrow-moat ResMed’s fourth-quarter revenue grew 2.7% on the prior year, the top line was separately boosted by once-off ventilator sales of USD 125 million, adding an additional 6% to total gains. However, the near-term outlook is subdued as current sleep apnea diagnosis rates are tracking below the previous corresponding period, or pcp, and coronavirus-related ventilator sales are expected to trail off. These headwinds lead us to trim our previous fiscal 2021 revenue and adjusted EPS estimates by 3%. Nonetheless, following a transfer of analyst coverage, our long run view is broadly unchanged. We expect ResMed to continue to grow strongly and gain share within the respiratory devices market. As such, we reduce our fair value estimate only slightly, to USD 133 (AUD 18.30) from USD 134 (AUD 20.00), including updating the USD/AUD exchange rate to 0.72 from 0.67 prior. Shares continue to screen as substantially overvalued.

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Company Profile

Business Description

ResMed Inc 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 payor 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 Jun 30, 2020
Fiscal Year End Jun 30, 2021
Stock Type Aggressive Growth
Employees 7,770