RMD Stock Up Following Q2 Earnings & Revenue Beat, Margins Expand

Resmed Inc.’s RMD adjusted earnings per share (EPS) in the second quarter of fiscal 2026 were $2.81, up 15.6% year over year. The metric beat the Zacks Consensus Estimate by 4.59%.

The adjustments include certain non-recurring expenses/benefits like the amortization of acquired intangibles, along with the income tax effect on those adjustments.

GAAP EPS in the reported quarter was $2.68, up 14.5% from the year-ago level.

RMD’s Revenue Details

On a reported basis, revenues increased 11% year over year (up 9% at the constant exchange rate or CER) to $1.42 billion. The figure topped the Zacks Consensus Estimate by 2.30%.

Since the earnings announcement on Jan. 29, Resmed shares have risen 3.7%, finishing yesterday’s session at $267.05.

Resmed’s Q2 Sales: A Closer View

Resmed operates through two reporting units — Sleep and Breathing Health (formerly Sleep and Respiratory Care) and Residential Care Software (formerly Software as a Service).

Sleep and Breathing Health

Total revenues improved 11.6% (up 10% at CER) from the prior-year period’s level to $1.26 billion.

Within this business, Devices revenues were $726.2 million, up 8.5% (7% at CER). This includes an increase of 8% year over year in the United States, Canada and Latin America, and a jump of 9% in combined Europe, Asia and other markets.

ResMed Inc. Price, Consensus and EPS Surprise

ResMed Inc. price-consensus-eps-surprise-chart | ResMed Inc. Quote

Revenues from Masks and other were $529.7 million, up 16.1% (14% at CER). This includes an increase of 16% year over year in the United States, Canada and Latin America, and 17% growth in combined Europe, Asia and other markets.

Residential Care Software

Revenues in this segment grew 6.6% year over year (up 5% at CER) to $166.9 million.

Resmed’s Q2 Margin Performance

In the fiscal second quarter, the company’s cost of sales (excluding amortization of acquired intangible) totaled $532.3 million, up 1.7% year over year.

Despite that, the adjusted gross profit rose 17.3% to $890.5 million. The adjusted gross margin was 62.6%, reflecting an expansion of 340 basis points (bps).

Selling, general and administration expenses jumped 15.2% year over year to $278.4 million. Research and development expenses increased 11.8% to $91 million.

The adjusted operating profit was $521.2 million in the quarter, up 19.6% from the year-ago quarter’s level. The adjusted operating margin expanded 263 bps year over year to 36.6%.

RMD’s Financial Updates

Resmed exited the second quarter of fiscal 2026 with cash and cash equivalents of $1.42 billion compared with $1.38 billion at the end of the first quarter.  

The cumulative net cash provided by operating activities at the end of the fiscal second quarter was $797.1 million compared with $634.2 million in the year-ago period.

The company paid out $88 million in dividends in the fiscal second quarter and also repurchased 704,000 shares for consideration of $175 million as part of its ongoing capital management.

Our Take on RMD Stock

Resmed closed the fiscal second quarter with better-than-expected earnings and revenues. Across Europe, Asia and the Rest of the World, Masks and other growth was driven by continued strategic expansion of the mask portfolio, strong focus on improved mask resupply through education, awareness and execution, as well as targeted initiatives in certain direct-to-consumer markets.

RCS performance is supported by a strong contribution from the Medifox DAN software vertical. The company continues to advance the portfolio management work within this business, targeting sustainable high single-digit growth and double-digit operating profit growth in the fiscal year 2027. Expansion of both margins is also highly encouraging.

Among major highlights, Resmed received FDA clearance for Personalized Therapy Comfort Settings in the second quarter, which will be marketed as Smart Comfort, designed to personalize CPAP comfort settings and improve patient adherence.

RMD’s Zacks Rank and Key Picks

Resmed currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the broader medical space are Intuitive Surgical ISRG, Phibro Animal Health PAHC and Align Technology ALGN.

Intuitive Surgical, currently sporting a Zacks Rank #1 (Strong Buy), reported a fourth-quarter 2025 adjusted EPS of $2.53, which surpassed the Zacks Consensus Estimate by 12.4%. Revenues of $2.87 billion beat the Zacks Consensus Estimate by 4.7%. You can see the complete list of today’s Zacks #1 Rank stocks here.

ISRG has an estimated long-term earnings growth rate of 15.7% compared with the industry’s 12.7% growth. The company beat earnings estimates in each of the trailing four quarters, the average surprise being 13.24%.

Phibro Animal Health,carrying a Zacks Rank #2 (Buy) at present, posted a second-quarter fiscal 2026 adjusted EPS of 87 cents, exceeding the Zacks Consensus Estimate by 27.01%. Revenues of $373.9 million topped the Zacks Consensus Estimate by 4.72%.

PAHC has an earnings yield of 6.7% compared with the industry’s 2.5% yield. The company’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 20.15%.

Align Technology,carrying a Zacks Rank #2 at present, posted a fourth-quarter 2025 adjusted EPS of $3.29, exceeding the Zacks Consensus Estimate by 10.1%. Revenues of $1.05 billion topped the Zacks Consensus Estimate by 5.3%.

ALGN has an estimated long-term earnings growth rate of 10.1% compared with the industry’s 9.5% growth. The company’s earnings outpaced estimates in three of the trailing four quarters and missed on one occasion, the average surprise being 6.16%.

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

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