Is it Worth Retaining ResMed Stock in Your Portfolio Now?

ResMed Inc.’s RMD growth in the fourth quarter of fiscal 2025 can be attributed to the robust performance of its Mask business. Its recovery in the Device business continues to drive overall revenue growth. However, a dull macroeconomic scenario and fierce competition put pressure on ResMed’s operations.

In the past year, shares of this Zacks Rank #3 (Buy) company have surged 10.6%, outperforming the industry’s 3.4% growth. The S&P 500 composite grew 15.5% in the said period.

The renowned medical device company has a market capitalization of $40.19 billion. RMD has an earnings yield of 4%, outpacing the industry’s -0.3%. The company’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 4.53%.

Let’s delve deeper.

RMD’s Key Tailwinds

Robust Mask Sales: Resmed’s continued product development is driving growth within this business globally. The company’s AirFit F40 is performing extremely well in the U.S. market. It also features the AirTouch N30i, the world’s first unique fabric-based patient interface, which was launched in select markets. Early feedback for AirTouch N30i is a positive. Additionally, in May, Resmed acquired VirtuOx, a leading independent diagnostic testing facility (IDTF) for sleep, respiratory and cardiac conditions.

During the fiscal fourth quarter, revenues from Masks and other businesses grew 12% year over year globally, including an increase of 12% in the United States, Canada and Latin America. Sales growth was augmented by the ongoing rollout of ReSupply program and new patient setups. Additionally, Resmed witnessed top-line growth of 11% in Europe, Asia and other regions combined.

Recovery in Device Sales: Resmed’s increased device sales continue to drive overall revenue growth, reflecting the ongoing combined availability of AirSense 10 and AirSense 11 sleep devices to support strong underlying global demand. During the fiscal fourth quarter, the company successfully maintained its market leadership, banking on its two AirSense platforms.

Globally, device sales grew 9.3% reportedly. Global device sales were driven by strong market performance from both the AirSense 10 and AirSense 11 platforms. The company is currently working to increase the availability of the AirSense 11 platform worldwide by securing market-by-market regulatory clearances. In lieu of this, Resmed launched Airsense11 in India. Additionally, in April, it launched the AirSense 11 version of VPAP Tx (sleep lab testing and titration platform).

RMD’s Key Headwinds

Challenging Macroeconomic Scenario: Global macroeconomic conditions, primarily headwinds arising from the Middle East conflict, are denting growth. Further, fluctuations in foreign currency exchange rates and volatility in capital markets could continue to affect Resmed’s results of operations.

Furthermore, with sustained inflationary pressures in the future, the company may struggle to keep its operating expenses in check as a percentage of net revenues. We are worried that this might adversely dent Resmed’s profitability. SG&A expenses rose 9.5% year over year. R&D expenses increased 6.9%.

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Competitive Landscape: The market for sleep-disordered breathing (SDB) products is highly competitive in terms of product price, features, and reliability. The disparity between the company's resources and those of its competitors may increase due to consolidation in the healthcare industry. Moreover, some of Resmed's competitors are affiliates of its customers, which may make it difficult for the company to compete with them.

RMD’s Estimate Trend

The Zacks Consensus Estimate for fiscal 2026 earnings has moved north 3.8% to $10.86 per share in the past 30 days.

The consensus estimate for fiscal 2026 revenues is pegged at $5.57 billion, which indicates an 8.2% increase from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Envista NVST, Masimo MASI and Phibro Animal Health PAHC.

Envista has an estimated earnings growth rate of 15.2% for fiscal 2026 compared with the S&P 500 composite’s 11.7% growth. Shares of the company have rallied 16% compared with the industry’s 3.4% growth. NVST’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 16.50%.

NVST carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Masimo, currently carrying a Zacks Rank #2, has an estimated long-term earnings growth rate of 12.5% compared with the industry’s 9.9%. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 9.17%. MASI shares have rallied 18.9% against the industry’s 15.4% decline in the past year.

Phibro Animal Health, carrying a Zacks Rank #2, has an earnings yield of 6.3% against the industry’s -0.3%. Shares of the company have surged 76.5% compared with the industry’s 3.4% growth. PAHC’s earnings outpaced estimates in each of the trailing four quarters, with the average surprise being 27.9%.

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This article originally published on Zacks Investment Research (zacks.com).

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