ResMed Inc. (RMD) – Diagnostic wins

ResMed manufactures sleep apnoea equipment and other respiratory devices and provides cloud-based software monitoring systems via the software as a service (SaaS) method. The company markets its products to sleep clinics, home healthcare dealers, and hospitals through a network of distributors and direct salesforce. ResMed was founded in 1989 and is headquartered in San Diego, California.

ResMed reported solid results for the June quarter, as revenue, margins, operating cash flow and dividend all bettered market expectations, underpinned by strong sales of its CPAP machines in the key US market and continued growth in mask sales.

The company’s CPAP machines sales in the US were supported by improvements in the diagnostic process and set-up, i.e. getting machines into the customers’ bedrooms, while the performance of the masks business was especially pleasing, driven by improvements to distributor supply and the inclusion of two months of revenue from the recent acquisition of Virtuox, a virtual diagnostic testing business.

Gross margins of 61.4% comfortably exceeded both market and Ord Minnett expectations of 60.2% and 60.6%, respectively, leading us to increase our estimate for FY26 gross margin by 0.5 percentage points. The sleep apnoea hardware and software equipment supplier remains an appealing investment option, in Ord Minnett’s view, with our US industry talks showing strong support from medical practitioners in what is still a large addressable market despite the rise of weight-loss drugs such as Ozempic.

We reiterate our Buy recommendation on ResMed and have raised our target price to $48.80 from $45.60.

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