After the NYSE closes on October 26, ResMed Inc. (CHESS) (ASX: RMD) will release its earnings for the first quarter of the 2018 financial year.
The June 2017 quarter was another solid operational result for the company with revenues up 7% to US$557 million (8% at constant currency). Earnings per share (GAAP) increased to US71 cents a share, gaining 20% over the prior period. The market did not respond well to the earnings report with the stock dropping almost 6% after the release of its numbers. The decline in the stock price was indicative of ResMed failing to meet the high expectations the market placed on it rather than an operational issue.
What to expect
Analysts' forecasts for the September 2017 quarter earnings range from a high of US67 cents a share, to a low of US63 cents a share with a consensus forecast of US65 cents a share.
One figure I'll be looking at closely is the combined revenue in the EMEA (Europe, Middle East, Africa) and APAC (Asia-Pacific) regions. Revenue in this combined segment still trails the Americas region but is growing at a higher rate.
Sleep apnea treatment remains a large and under penetrated market. According to a Sleep Heart Health Study, 26% of adults have sleep apnea and countries like China and India are large markets with low levels of sleep apnea solutions. ResMed is one of the leaders of sleep apnea treatment and has the capability to capitalise on these high growth opportunities.
Foolish takeaway
ResMed remains one of the best Australian businesses with a global focus and its share price has risen sharply recently to close at $10.19 after recovering from the $8.94 bottom following the June 2017 earnings report. The stock is not cheap, currently trading at approximately 26 times estimated FY 18 earnings. If the company fails to meet market expectations again there could be another selloff, thus providing an opportunity to acquire shares in one of Australia's best healthcare stocks.
