ResMed Expected To Deliver Subdued Quarterly

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This story features RESMED INC.
For more info SHARE ANALYSIS: RMD
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Shaw

After trading below $4.50 per share around November last year the share price of sleep disorder group ResMed ((RMD)) has recovered to closer to $5.00, gains Credit Suisse suggests reflect at least in part recent favourable moves in the Australian/US dollar exchange rate.

While this is a positive and the broker continues to rate the stock as Outperform it is not looking for a strong 2Q earnings result tomorrow, suggesting as the company continues to cycle strong comparable numbers from last year and while the turnaround in its German operations has not been completed any earnings improvement should be somewhat muted.

It is forecasting a profit of US$31 million, which is based on a margin estimate of 15.6%, which is at the lower end of the industry average of 15-20%. Citi agrees margins for the period will be a key feature of the result as pricing pressure continues in the key US market. As a result it rates the stock as a Hold at current levels.

Citi anticipates volume growth for the quarter of around 16%, but points out value growth is only expected to increase by 11-13%, while there is also scope in its view for the new CEO to try to write-down any potential nasties to set a base for future earnings.

As a result the broker is forecasting a profit for the quarter a little below that of Credit Suisse at US$28.9m, while it suggests the consensus forecast is for a quarterly result of US$29.9m.

There remains some variability in terms of full year forecasts, Credit Suisse being somewhat more aggressive with its estimate of US17.1c in EPS (earnings per share) terms, while Citi is at US15c. Thomson One Analytics shows a median EPS estimate for the full year of US17c.

The FNArena database shows five Buy and five Hold ratings on the stock, with an average share price target of $6.05, in line with the median price target according to Thomson One of $6.04.

Shares in ResMed today are slightly higher despite a weaker overall market and as at 12.15pm were up 5c at $4.95.

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