ResMed share price lower despite delivering strong growth in FY 2020

The ResMed Inc. (ASX:RMD) share price is dropping lower on Thursday despite its full year results smashing expectations once again…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The ResMed Inc. (ASX: RMD) share price is dropping lower on Thursday morning following the release of its fourth quarter and full year update.

At the time of writing the sleep treatment-focused medical device company's shares are down 4% to $26.82.

How did ResMed perform in the fourth quarter?

For the three months ended 30 June 2020, ResMed delivered a 10% constant currency increase in revenue to US$770.3 million. This compares to the analyst consensus estimate of US$752 million.

A key driver of this growth was its Europe, Asia, and Other business, which delivered a 22% increase in revenue during the quarter. Management advised that this was primarily driven by sales across its device product portfolio, including increased demand for ventilators due to COVID-19.

The U.S., Canada, and Latin America business grew revenue by 4% during the quarter. This was thanks to strong sales across its mask product portfolio and increased demand for ventilators. This offset softer than expected mask sales during the period.

Finally, the fledgling Software as a Service business was on form and achieved a 7% increase in revenue. This was due to continued growth in resupply service offerings and stabilising patient flow in out-of-hospital care settings.

This led to the company reporting full year FY 2020 revenue of US$2,957 million, up 15% year on year in constant currency.

What about its earnings?

ResMed reported a further increase in its gross margin during the fourth quarter. It increased 60 basis points to 59.9%, which underpinned a 24% increase in quarterly operating profit to US$243.4 million and a 40% lift in quarterly net income to US$193.3 million.

For the full year, the company's operating profit grew 24% to US$890.9 million and net income lifted 32% to US$692.8 million.

ResMed's CEO, Mick Farrell, commented: "Our fourth quarter results reflect the strength and resiliency of our business in today's uncertain environment. We finished fiscal year 2020 with double-digit revenue growth to US$3.0 billion and operating profit up 24% on a non-GAAP basis."

"Throughout our fiscal fourth quarter, we continued to support the COVID-19 pandemic response through increased manufacturing of our ventilators, including bilevels, and ventilation mask systems while also supporting our customers with digital health solutions and other innovative tools to enable remote care for patients," he added.

Outlook.

Mr Farrell appears cautiously optimistic on the company's prospects in FY 2021.

He said: "Looking ahead, we are confident in our ability to navigate through the ongoing challenging clinical and economic environment to deliver for all our stakeholders. Sleep labs and physician practices are reopening across many geographies, and we're seeing accelerated adoption of digital health solutions which supports our long-term strategy."

"We remain vigilant and thoughtful about the outlook for our business as we continue to serve our customers, and we believe our strong foundation will accelerate our growth over the longer term," he concluded.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A female broker in a red jacket whispers in the ear of a man who has a surprised look on his face as she explains which two ASX 200 shares should do well in today's volatile climate
Broker Notes

5 of the best ASX 200 shares to buy in June

Let's see what brokers are recommending to investors for next month.

Read more »

A man looking at his laptop and thinking.
Share Market News

5 things to watch on the ASX 200 on Monday

Here's what to expect on the benchmark index today.

Read more »

An ASX 200 market analyst holds his hand to his chin and looks closely at his computer screens watching share price movements
Opinions

Forget term deposits! I'd buy these two ASX 200 stocks instead

I think ASX stocks could make a much better investment than term deposits.

Read more »

A cute little kid in a suit pulls a shocked face as he talks on his smartphone.
Share Market News

Telstra share price hits 8-year high amid a lacklustre trading week

The ASX 200 communications services sector was the best performer last week, rising 2.96%.

Read more »

share buyers, investors, happy investors
ETFs

How I would build a $100,000 portfolio with ASX ETFs today

You don't need more than three ETFs to build a diversified portfolio...

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

These ASX 200 shares could rise 20% to 100%

Analysts are expecting these shares to deliver big returns over the next 12 months.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX shares finished the trading week on a high this Friday.

Read more »