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The ResMed Inc. (ASX: RMD) share price is on a bullish streak once again, gaining momentum on Monday's trading session, soaring by as much as 3.43% to AU$32.58.
The driving force behind this surge in ResMed's share price can be attributed to the release of an impressive quarterly update issued by the company towards the end of the previous week. The update spurred a remarkable 18% surge in ResMed's shares on the New York Stock Exchange (NYSE) during Friday's trading session.
ResMed reported a noteworthy 7% increase in revenue, reaching US$1.2 billion for the three months ending on March 31. Management attributed this growth to heightened demand for sleep devices and robust expansion across its mask product portfolio. Additionally, investors were pleased to see ResMed's gross margin surpassing expectations, widening by 260 basis points to 57.9% on a GAAP basis and 240 basis points to 58.5% on a non-GAAP basis. This exceeded the consensus estimate of 57.6% for gross margin.
As a result of this strong top-line growth and margin enhancement, ResMed witnessed a 25% increase in income from operations, amounting to US$374.6 million, and a 29% rise in diluted earnings per share, reaching US$2.04 per share.
Mick Farrell, ResMed's chair and CEO, expressed satisfaction with the company's performance, stating:
"ResMed's strong third-quarter fiscal year 2024 results reflect robust patient and customer demand for our products and software solutions, leading to double-digit mask and accessories revenue growth along with ongoing operational efficiencies to drive margin improvement and increased profitability, resulting in double-digit growth in both operating profit and earnings per share."
Positive Broker Response
Leading brokers in Australia have responded favorably to ResMed's quarterly update. Citi reiterated its buy rating on the company's shares, with an upgraded price target of AUA$36.00, implying a potential upside of 10% for investors. Similarly, Macquarie maintained its outperform rating, raising the price target to U$34.85, while Morgans reaffirmed its add rating and increased the price target to AU$34.11.
Moreover, ResMed garnered attention from Goldman Sachs' US team, earning a spot in its High-Quality Stock basket. With potential delays in rate cuts, Goldman Sachs advises investors to consider investing in quality stocks like ResMed.
The surge in ResMed's share price reflects investors' confidence in the company's strong financial performance and growth prospects. As ResMed continues to capitalize on increased demand for its products and executes operational efficiencies, investors remain optimistic about the company's future earnings potential.
