The ResMed Inc (ASX: RMD) share price is making a comeback after a strong quarterly update and series of big broker upgrades
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The Resmed CDI (ASX: RMD) share price spiked more than 8.5% last Friday following an upbeat quarterly business update from the company. The strong result has attracted a series of share price upgrades from big brokers. Here’s the rundown.
First quarter update
Resmed’s quarterly update reflected positive trends across the business and an all round solid performance. Its revenues increased 10% to $751.9 million, up 9% on a constant currency basis while net operating profit increased 27%.
“During the quarter, we continued to support the global COVID-19 pandemic response, providing ventilators, masks, and circuits to countries in need around the world,” said Mick Farrell, Resmed’s CEO. The company’s 9% increase in revenue was driven by strong sales in its mask product portfolio and increased demand for ventilators, partially offset by a decrease in demand for its sleep devices.
Revenue in combined Europe, Asia and other markets grew by 10% on a constant currency basis, primarily driven by sales across device and mask product portfolios, including increased demand for ventilators due to COVID-19.
The business also experienced a 7% decrease in selling, general and administrative expenses for the quarter. These expenses improved to 21.1% of revenue compared to 24.6% in the same period of the prior year. These changes were mainly due to savings in travel and other cost management measures as a result of the pandemic.
The Resmed share price is in recovery mode following a disappointing FY20 result back in August. The positive Q1 update has enabled the ASX share to claw back most of its August sell down.
A series of broker updates came about on Monday after the quarterly was digested. Credit Suisse Group AG (NYSE: CS) raised the Resmed share price target from $28.00 to $31.00 and upgraded its rating from neutral to outperform. It anticipates a strong uptick in earnings growth as COVID-19 supports key healthcare segments where the company operates.
Macquarie Group Ltd (ASX: MQG) also upgraded its rating from underperform to neutral and raised its Redmed share price target from $20.00 to $27.25. It notes a significant rebound in the underlying business in September and upgraded earnings forecasts.
Finally, Morgan Stanley (NYSE: MS) raised its Resmed share price target from $25.90 to $27.00 and retained an equal weight rating. The quarterly trading update came out ahead of its expectations.
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Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. 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.