ResMed (RMD) Q4 2026 Earnings Call Transcript

ResMed reported Q4 FY2026 revenue of $1.46B (+9% YoY) and non-GAAP EPS of $2.95 (+16%), supported by a 90 bps YoY gross margin increase to 62.3%. For FY2027, it guided revenue of $5.75B–$5.85B (+5%–7%) and non-GAAP EPS of $12.00–$12.25 (+7%–10% reported), including a $75M Astral revenue suspension headwind (~$0.15 EPS) that is already baked into the range. Capital returns accelerate materially: FCF of $1.65B in FY2026 (returning $1B+ to shareholders) and a FY2027 capital return target of $1.85B (up >75% YoY) via a $1.5B buyback target plus a 10% dividend increase to $0.66/share.

Analysis

RMD is still the cleaner compounder in sleep medtech, but the equity case is increasingly about channel control and adherence, not headline unit growth. The bigger second-order winner may be the ecosystem around diagnosis-to-therapy conversion: wearables, home sleep testing, and clinician workflow tools that push more patients into the funnel and raise lifetime value. That said, the portfolio cleanup means reported growth will look noisier than core growth, so investors may overestimate the durability of top-line acceleration if they focus on stated revenue rather than underlying mix.

Near term, the main risk is that margin expansion stalls before the price increases fully flow through. Q1 looks like a likely air pocket because inflation and freight can outrun productivity for another quarter or two, while the Astral reset removes revenue immediately but takes time to normalize the cost structure. If gross margin does not re-accelerate by Q2 and core device/mask growth slips back toward market rates, the stock could de-rate despite the buyback story.

The contrarian miss is that GLP-1s and wearables are not necessarily demand creators so much as demand shifters from later-stage therapy to earlier-stage screening; the real monetization is in resupply and compliance, where RMD already has leverage. Over 6-18 months, the combination of ASR-funded buybacks, dividend growth, and a cleaner core could support multiple expansion, but only if management proves it can convert awareness into persistent therapy adherence rather than one-off diagnosis. Falsifiers: Q1/Q2 gross margin not improving, core revenue falling below mid-single digits, or price increases triggering DME/HME pushback.

Key Decisions for Investors

• Buy RMD on post-earnings weakness over the next 1-2 weeks; thesis is 3-6 months of buyback/ASR support plus cleaner core disclosure, with downside capped if core growth stays >6% and gross margin re-accelerates in Q2.
• Pair trade: long RMD / short PHG for 1-3 months to isolate channel-share and recall-execution divergence; stop if PHG shows better-than-expected sleep-device stabilization or if RMD margins miss again in Q1.
• Use RMD as a defensive healthcare compounder rather than a momentum name; trim/add around Q1 if gross margin is flat-to-down, because that would signal price realization is too slow versus inflation.
• Watch list alert: if reported core EPS growth stays ahead of revenue by 400bps+ through FY27, the market should reward the buyback/dividend reset with multiple expansion; if not, treat the stock as a low-teens EPS grower and cap upside.
• For broader exposure, prefer a direct RMD overweight versus XLV as long as GLP-1/wearable funnel metrics continue to improve; if those metrics stall, rotate back to market weight.