ResMed at Morgan Stanley healthcare conference: growth, margins, GLP-1 tailwind

ResMed issued first-time FY2027 guidance for 5%-7% core constant-currency revenue growth and 12%-14% core EPS growth; excluding a $75M Astral safety-notice headwind, implied organic revenue growth is 6.3%-8.3%. Management expects low-double-digit annual gross-margin expansion through 2030 despite freight and component inflation, while GLP-1 users showed CPAP start rates 11 percentage points higher and resupply rates 300bps higher after one year. ResMed is sunsetting Astral after a $42M charge, pivoting ventilation growth to AirCurve 11, and has reshaped its portfolio through the $340M Noctrix investment and $490M MatrixCare divestiture.

Analysis

RMD’s setup is less about the headline growth range than the earnings algorithm: modest revenue growth converting to materially faster EPS implies continuing opex leverage and mix benefits from recurring masks/resupply. The market should reward evidence that digital engagement lifts replacement cadence, because consumables carry better economics and reduce dependence on new-device demand. The near-term constraint is that planned pricing is back-end loaded while freight and component inflation is front-loaded, creating a plausible first-quarter gross-margin miss even if full-year guidance remains intact.

The more consequential competitive issue is not PHG’s eventual U.S. device return but reimbursement-channel behavior. A value-oriented entrant can pressure DME economics and drive tender pricing before it materially takes device share; RMD’s installed-base data and workflow integration are the defense, but investors should track Americas mask/accessory growth and gross margin rather than management’s confidence on share. The AI-driven component squeeze also creates an unusual second-order risk: RMD’s mature-device exposure may face recurring input inflation while high-volume consumer-electronics buyers retain procurement priority.

GLP-1 overlap is directionally supportive, but management’s cohort evidence is observational and likely reflects a more motivated, commercially insured patient population. Consensus may overcapitalize the upside before independent persistence data establish causality. The underappreciated upside is that earlier diagnosis through wearables and primary care expands the addressable treated population, which favors RMD’s end-to-end testing, referral and resupply ecosystem over standalone device competitors over 6-18 months.

At ~22x earnings, RMD is not priced as a no-growth medtech, but the valuation leaves limited tolerance for a margin-guide reset. A beat-and-raise path over the next 1-3 months requires proof that pricing and productivity offset cost inflation by Q2; a miss in the first quarter could be a better entry point rather than a thesis break if accessories growth and operating leverage remain intact.

Key Decisions for Investors

• Accumulate RMD on a post-results pullback tied to first-quarter gross margin, targeting a 6-12 month hold. Underwrite 12-14% EPS growth and multiple stability; exit or reduce if full-year gross-margin expansion guidance is withdrawn or Americas masks/accessories growth falls below high-single digits for two consecutive quarters.
• Use a 6-9 month RMD/PHG pair: long RMD, short PHG in equal beta-adjusted dollars. The trade expresses RMD’s superior installed-base monetization and digital workflow moat against PHG’s likely low-price reentry costs; reassess if PHG announces U.S. clearance plus a credible DME distribution partnership or RMD’s Americas device growth decelerates below its mid-single-digit target.
• Do not add GLP-1 exposure through LLY on this read-through alone. Instead, monitor RMD’s reported cohort retention and resupply conversion over the next two quarters; initiate an incremental RMD long only if management quantifies durable growth contribution above 100 bps without increased customer-acquisition spend.
• Set an earnings alert for a sequential gross-margin decline larger than 50 bps or component-cost commentary worsening beyond older platforms. That would signal supplier-power pressure is overwhelming productivity and raises downside risk to the operating-leverage thesis over the next 1-3 months.