Is it Worth Retaining ResMed Stock in Your Portfolio Now?

ResMed's fiscal Q3 2025 growth is driven by strong mask sales, benefiting from a competitor's recall, and advancements in digital health technology, particularly its AirView and myAir platforms utilizing AI for personalized therapy. Mask and other revenues grew 11% year-over-year globally. However, ResMed faces headwinds from a challenging macroeconomic environment, including the Middle East conflict and currency fluctuations, as well as increasing competitive pressure in the sleep-disordered breathing market, potentially impacting profitability despite a 0.3% upward revision in fiscal 2025 earnings estimates to $9.48 per share.

Analysis

ResMed Inc. (RMD) reported strong growth in the third quarter of fiscal 2025, primarily fueled by its Mask business, which experienced an 11% year-over-year global revenue increase, including a 13% rise in the United States, Canada, and Latin America. This segment's performance was significantly boosted by robust demand for its market-leading mask portfolio, including the AirFit F40 and the newly launched AirTouch N30i, and has benefited from a competitor's recall. The company's advancements in digital health technology, particularly through its 100% cloud-based platforms AirView and myAir and investments in AI-driven capabilities like Compliance Coach, are also key revenue drivers and are receiving positive early feedback. Consequently, ResMed's shares have surged 15.1% in the past year, outperforming the industry's 8.6% growth and the S&P 500's 10.1% rise. Despite these positive developments, ResMed faces notable headwinds, including a challenging global macroeconomic scenario marked by geopolitical conflicts and potential foreign currency fluctuations, which, coupled with sustained inflationary pressures, led to a 6.7% year-over-year increase in SG&A expenses and an 8.9% rise in R&D expenses. Intense competition in the sleep-disordered breathing (SDB) market also poses a risk to operations. Nevertheless, the Zacks Consensus Estimate for fiscal 2025 earnings has moved up 0.3% to $9.48 per share, with projected revenues of $5.12 billion indicating a 9.3% increase from the prior year, and the company boasts an earnings yield of 3.9%, outpacing the industry average.

Key Decisions for Investors

• Investors should recognize ResMed's strong current performance, particularly the growth in its Mask business and advancements in digital health, which have driven significant stock appreciation and positive earnings estimate revisions.
• Careful monitoring of the impact of macroeconomic headwinds, such as currency volatility and geopolitical tensions, as well as the intensely competitive SDB market, is warranted as these factors could pressure profitability and operational efficiency.
• Consider the implications of rising operating expenses (SG&A and R&D) on future margins, despite the current positive outlook and revenue growth projections.