ResMed Inc (RMD) kicked off the year with a strong performance, exceeding analyst expectations for both revenue and earnings in the first quarter. The medical device company reported adjusted earnings per share (EPS) of $2.20, a 34% surge compared to the same period last year, easily surpassing the consensus estimate of $2.04. Revenue also climbed 11% to $1.224 billion, outpacing the anticipated $1.18 billion, driven by a combination of factors.
One key driver of this growth was the increased demand for ResMed’s sleep devices and masks portfolio. The company also experienced robust performance in its Residential Care Software business, which saw revenue increase by 12% on a constant currency basis. This growth reflects the ongoing organic expansion of the Residential Care Software portfolio.
ResMed’s strong performance wasn’t just about top-line growth. The company also demonstrated impressive operational efficiency, reflected in a 420 basis point increase in gross margin. This improvement was attributed to manufacturing efficiencies, component cost improvements, and an increase in average selling prices. Non-GAAP gross margin also saw a significant increase of 320 basis points.
“Our first-quarter fiscal year 2025 results reflect ongoing momentum and strong execution across all areas of our business,” said Mick Farrell, Chairman and CEO of ResMed. “We delivered 11% year-over-year revenue growth, and our focus on operational excellence resulted in another quarter of year-over-year margin expansion and a 34% increase in operating profit.”
Adjusted operating income climbed 27% to $406.4 million, while adjusted net income rose by 35% to $325 million.
William Blair, a prominent investment firm, notes that ResMed’s earnings per share surpassed their estimates by $0.16, exceeding expectations by 8%. The analyst maintains an Outperform rating on the stock, citing ResMed’s solid fundamentals and positive outlook.
William Blair highlights the company’s strong execution, leading market position, and balanced emphasis on growth and profitability as key reasons for their confidence. The analyst believes ResMed is well-positioned to capitalize on the enduring trends in sleep health. While concerns surrounding GLP-1 therapies may resurface as investors evaluate upcoming developments, including potential label expansions, ResMed’s strong revenue and earnings growth are expected to maintain momentum, as evidenced by recent quarters.
“With catalysts to come from margin expansion, new product launches, and the recent resolution to the competitive consent decree, we believe the fundamentals in this durable medtech growth story remain positive,” writes William Blair analyst.
As a result of this strong performance, RMD stock saw a significant boost on Friday, closing up 7.81% at $257.71. This upward momentum reflects the market’s confidence in ResMed’s continued success and its ability to capitalize on the growing demand for sleep health solutions.
