On Wednesday, Needham maintained a Hold rating on ResMed (NYSE:RMD), a medical equipment company known for its sleep-related products. The firm's stance comes ahead of ResMed's investor day scheduled for September 30, 2024, in New York City. This event marks the first of its kind since September 2021, highlighting significant changes for the company over the past three years.
ResMed has experienced a return to normalcy in its supply chain post-pandemic and has successfully gained a considerable market share from its competitor, Philip Respironics, which is not rated. The company's revenue growth is also returning to standard levels after a period of heightened performance.
During the last investor day in 2021, ResMed set long-term goals for mid- to high-single digit revenue growth and an operating margin of over 30%. These targets were set during a time when the company was already performing above the guided figures. With the upcoming investor day, there is an anticipation of similar revenue growth targets being announced, along with a potentially higher operating margin goal, possibly ranging between 33-35%.
Despite these prospective developments, the analyst does not foresee the investor day acting as a significant catalyst for ResMed's stock. The Hold rating suggests that the firm advises investors to maintain their current position on the stock, without making additional investments or divesting their holdings at this time.
In other recent news, ResMed has been the subject of multiple analyst reviews following its strong fourth quarter fiscal year 2024 results, which saw a 9% increase in group revenue to $1.22 billion, primarily driven by robust mask sales in the United States.
Amid these developments, Wolfe Research downgraded ResMed from Peer Perform to Underperform due to concerns about potential market disruption from Eli Lilly (NYSE:LLY)'s expected introduction of a new medication for obstructive sleep apnea. Similarly, Needham downgraded its rating from Buy to Hold, citing anticipated challenges in the competitive landscape and slowing growth.
On a more optimistic note, William Blair maintained an Outperform rating on ResMed, anticipating a significant increase in sleep apnea and CPAP patients by 2025. Financial firms CLSA and RBC Capital also revised their price targets for ResMed to AUD35.00 and AUD206.00 respectively, reflecting the company's recent performance and market dynamics.
In addition to its revenue growth, ResMed reported a 10% increase in its quarterly dividend to shareholders, reduced its debt by $300 million, and repurchased 232,000 shares for $50 million. The company has also indicated plans to invest in research and development, pursue acquisitions, and continue its share buyback program.
InvestingPro Insights
As ResMed (NYSE:RMD) prepares for its investor day, a glimpse at the company's financial health through InvestingPro data reveals a robust picture. ResMed boasts a solid market capitalization of $36.86 billion, underscoring its significant presence in the medical equipment industry. The company's dedication to shareholder returns is evident, with a history of raising its dividend for 12 consecutive years, a detail that aligns with the company's financial strength and commitment to investors.
InvestingPro Tips indicate that analysts are optimistic about ResMed's earnings, with two analysts revising their earnings upwards for the upcoming period. This could be a signal of confidence in the company's ability to outperform expectations. Additionally, with a strong return over the last year, ResMed has demonstrated its ability to navigate market conditions effectively. Interested readers can find more detailed analysis and additional InvestingPro Tips at https://www.investing.com/pro/RMD, which lists a total of 17 tips for a comprehensive investment perspective.
Key financial metrics such as a Price/Earnings (P/E) Ratio of 36.09 and a Price/Book (P/B) Ratio of 7.58 reflect a company trading at a premium, potentially due to its market positioning and growth prospects. Revenue growth of nearly 11% over the last twelve months indicates a healthy expansion rate for ResMed, which may be a focal point during the upcoming investor day. With a dividend growth of over 20% in the same period, ResMed not only appeals to growth-oriented investors but also to those seeking income through dividends.
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